Jargon Buster

Equity Release Jargon Buster

Annuity
An annuity converts a lump sum into income which is taxed.

APR
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).

Arrangement fee
A commitment or administration fee usually payable to the lender to reserve the mortgage funds.

Buildings insurance
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.

Equity release
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.

Interest-only mortgage
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.

documents
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!

Legal fees
A fee you pay to your solicitor for their services.

Lifetime mortgage
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.

  • Drawdown

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.

Mortgage
A loan secured on property.

Negative equity
The amount you owe the lender is more than the value of your home.

Secured
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.

Valuation

A type of survey that tells the lender or provider how much your property is worth.

 

What Would Equity Release Offer You?

mortgage and debts

Mortgage & Debts

home improvements

Home Improvements

holidays

Holidays

assist loved ones

Helping Loved Ones

FIND OUT MORE

If you would like to know more about equity release then please get in touch.

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