Equity Release Jargon Buster
An annuity converts a lump sum into income which is taxed.
Annual percentage rate – the APR includes important factors such as:
- the interest rate you must pay;
- how you repay the loan (length of loan agreement [or term], frequency and timing of instalment payments and amounts of each payment);
- certain fees associated with the loan; and
- certain compulsory insurance premiums (for example, payment protection insurance).
A commitment or administration fee usually payable to the lender to reserve the mortgage funds.
Insurance to cover the cost of repairing or rebuilding your home if it’s damaged or destroyed.
Early Repayment Charge (ERC)
A fee if you pay back your lifetime mortgage too soon. Some lenders will tie you in to an ERC for a fixed period, say 5 or 10 years. Others apply an ERC throughout the life of the mortgage. There is no ERC if the mortgage is paid back after you die or move into long term care.
A way in which you can benefit from the value of your home without having to move out – by borrowing on it or selling all or part of it for a lump sum.
Home reversion plan
You sell all or part of your home to a third party in return for regular income and/or cash lump sum and continue to live in your home for as long as you wish.
You take out a loan on which you only pay the interest back each month. You do not pay off any of the capital. Instead, in a lifetime mortgage, the lender will be repaid by selling your home when you die or go into long-term care.
Important information for you, set out in a standard way set by the FCA, so you can compare service, product and costs. Make sure you read them!
A fee you pay to your solicitor for their services.
You take out a loan secured on your home, which is repaid by selling your home when you die or go into long-term care. There are several ways a Lifetime mortgage can be set up:
- Roll-up mortgage
You take out a loan as regular income or cash lump sum. The interest on the loan is rolled-up each month or year and added to the loan. This means you may end up owing more than the value of your home (i.e. more than you borrowed).
- Interest-only lifetime mortgage
You take out a loan on which you only pay some or all of the interest back each month. You do not pay off any of the capital. Instead, in a lifetime mortgage, the lender will be repaid by selling your home when you die or go into long-term care.
The lender sets aside an amount of money alongside your mortgage that you can ‘draw down’ when you need it. You won’t pay any interest on it until you draw the money out.
- Flexible lifetime mortgage
You may be able to repay some of the capital you have borrowed without any charges.
A loan secured on property.
The amount you owe the lender is more than the value of your home.
Secured means that if you do not keep up the payments on your loan, the lender can sell your home to get its money back.
A type of survey that tells the lender or provider how much your property is worth.
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