Equity Release

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Equity Release: the Lifetime Mortgages option

Lifetime mortgage equity release schemes provide you with extra money by releasing some of the value of your property. They can be very useful products if you need a lump sum to help you pay for home renovation, a new car or another important investment. As there are various types of lifetime mortgages, it is a good idea to research all of the options available before making a decision. Take a look at this short guide to the equity release schemes available to you.

Types of lifetime mortgage equity release

Firstly, there is the straightforward lifetime mortgage scheme. In this case, you do not pay any interest until the end of the mortgage term, and do not make any monthly repayments on the amount you are borrowing until the end of the term. You must be over 55 years of age for this equity release option. You can take out your equity as either a lump sum or as a monthly income, or both in some cases.

Next, there is the flexible lifetime mortgage scheme. With this kind of equity release, you agree with the provider a maximum facility, but only take the amount that you need initially. The rest of the equity can be accessed at later dates. By splitting the amount of equity you are releasing over time, you prevent building up so much interest, as you only accrue interest on how much is outstanding, rather than the maximum amount. You retain the right to live in your property until the end of your life. Another advantage is that you will not have to have your house revalued every time you wish to access equity, but the disadvantage is that the interest rate on these kinds of equity release is likely to be higher than with other options.

All lifetime mortgages have the advantage of being available to you at a younger age, around 55, than other types of equity release which are normally only available to people aged 65 and over. It is advisable to note, however, that if you take the maximum equity available and spend it all relatively early, you may not be able to access any more equity later, as you could with other types of equity release.

It is important to remember that the amount of equity you release from your property will be paid back on you or your partner’s death, or when one or both of you has moved into residential care, using the profits from the sale of your house. Thus, the amount of equity you pass on to your beneficiaries when you die will be reduced if you release equity from the property, and for this reason, it is advisable to take this into consideration when making your financial plans.

With good planning and research, a lifetime mortgage equity release scheme could be just the answer you were looking for to build that extension, invest in a new car or help a family member get on their feet. You may also wish to enlist the help of an independent financial advisor to help you find the best deal for you.

The Mortgage Broker

0800 822 3355


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