More and more people over 55 are choosing to switch from a fixed-term mortgage to a lifetime mortgage to free up income and lower their monthly outgoings. One of the most attractive elements of equity release is that nothing has to be repaid until you die or go into long-term care. The end of your equity release policy comes when the last homeowner has passed away. Your estate will then be responsible for paying back the final balance. This will be the responsibility of your executors which is why we always recommend involving family members in discussions over plans to release equity from your property.
Lifetime Mortgage options
With a lifetime mortgage some people may choose to let the interest roll-up and not pay back anything at all. Other customers may want to make voluntary payments towards their loan. Access Equity Release can help you make the right decision for you and your circumstances.
Some plans may even let you pay up to 40% back without being charged.
However, when you are choosing your mortgage it is important to look for extra costs such as early repayment fees. This is a charge you may incur from your provider if you overpay more than they allow or repay the full amount early. Your equity release adviser will be able to help you decide on the best product for you. These fees can be expensive so make sure you discuss this before committing to a product.
Downsizing and equity release
Downsizing is often discussed as an alternative to equity release. However, some may choose to move house and downsize after they have signed up to an equity release product. Downsizing protection allows these customers to repay their equity release plan without being charged an early repayment fee if they repay from the sale proceeds of the property. This is not usually something offered in the first couple of years of a plan but maybe an option from year three or five. Again, ask your adviser if you think this is something you might need from a product.
In some cases, it is possible that the lender is not prepared to lend on the new home. However, they may allow you to repay your loan when you move.
No Negative Equity Guarantee
If you are concerned about your home being worth less than it was when you received your loan, you can be reassured that a No Negative Equity Guarantee means that your executors will only have to repay what the home sells for, even if it is less than the remaining balance.
Death of homeowner/s
If you are applying for equity release as a joint applicant with your spouse, you may want to consider a mortgage with Significant Life Event cover. This cover will allow you to repay your loan without incurring a fee if one of the homeowners dies within the first few years of the plan.
When both homeowners have died or gone into long-term care the lender will typically allow up to 12 months for the outstanding balance to be repaid. However, this will vary according to each lender. Your adviser will be able to help with this. It is important to note though, that interest will continue to accrue on the loan for as long as it runs.
Are there other ways equity release can be repaid?
The loan does not necessarily have to be repaid from the proceeds of the house sale. If you have cash or another asset which can be sold, these can be used to settle the final bill instead. This will then mean that your beneficiaries can inherit your home and choose to do what they want with it.
:: Use our Equity Release Calculator to work out how much cash you could release.
It is important to take expert advice on equity release before deciding whether it is right for you. Contact us to find out more from one of our highly trained advisors.