Equity release; it’s all over our TV screens and radio, but what do you actually know about it? Expert Chris Brooks separates the fact from the fiction and busts those myths you’ve heard about lifetime mortgages.
The most common form of equity release is a Lifetime Mortgage, put simply this is a long-term loan which allows you release the wealth tied up in your property.
Myth 1: Lifetime mortgages are unsafe and unregulated.
Fact: Lifetime mortgages are regulated by the FCA, also the Equity Release Council is set up to protect the interests of consumers so you should have peace of mind to consider equity release.
Myth 2: You’ll owe more than the value of your home.
Fact: Products which meet the Equity Release Council’s product standards are required to feature a no negative equity guarantee. Put simply, this guarantee means that you, or more specifically your estate will never owe more than the property is worth once it is sold.
Myth 3: You must stay in the same property for the rest of your life.
Fact: With most lifetime mortgages, you can move home and transfer the loan to the new property providing it meets the lenders terms and criteria.
Myth 4: You will leave a debt to your family and loved ones.
Fact: Providing the terms and conditions are met, no debt is left to your estate, and you or your family will never owe more than the value of your home once sold upon death or permanently moving into long-term care.
Myth 5: Equity can’t be released if there is an outstanding mortgage.
Fact: You can apply for a lifetime mortgage providing you pay off your existing mortgage balance. This can be done either through the equity released from your property or by another means.
Myth 6: It’s not possible to reduce the outstanding debt.
Fact:Many lifetime mortgages allow for 10% voluntary repayments without you incurring any early repayment charges.
With some plans you can also make monthly interest repayments; this way you can maintain
the debt to the initial amount of the loan before interest. Lenders will need to check these payments are affordable to you. If you choose to make interest repayments, you still have the option to move to a roll up arrangement at a later date if you wish. There are even some lenders who can offer you the option to pay off some of the capital throughout the plan.
Myth 7: You won’t be able to leave your property as an inheritance.
Fact: Once the loan has been repaid from the sale of your property, any money left over can go to your beneficiaries. Some plans let you ring fence a portion of your home’s equity to leave as an inheritance for your loved ones.
Myth 8: You’ll lose ownership and control of your property.
Fact: With a lifetime mortgage you continue to own 100% of your home. A lifetime mortgage is a loan secured against your property, so you will always retain ownership until you either die or move into permanent long-term care, after which time your property will be sold to repay the loan plus any accrued interest.
A better understanding.
Now we’ve dispelled the myths you have a better understanding of what choosing a lifetime mortgage actually means and its impact on you and your family.
There’s a useful calculator tool HERE for you to find out how much money you could unlock from your home.
At Harbour Equity Release our objective is to find the right solution for you. There is no obligation to proceed, and if equity release isn’t your best option
we will let you know. Please visit my website for frequently asked questions, a free-to-use calculator to see how much equity you could release and more. Please feel free to either give me a call on 01202 925 976 or email me at enquiries@harbourequityrelease.co.uk
