Equity release allows homeowners, generally aged 55 and over, to tap into the value of their property without needing to sell it. It lets you access a portion of your home's worth as tax-free cash, either in a lump sum or through smaller payments, while you continue living there. The loan, along with any accrued interest, is typically repaid when the property is sold after you pass away or move into long-term care.
A Lifetime Mortgage lets you borrow a percentage of your home's value while retaining full ownership. The loan, along with any accrued interest, is typically repaid when the property is sold after you pass away or move into long-term care.
A Home Reversion Plan allows you to sell all or part of your home to a reversion company in exchange for a lump sum. You can continue living in your home rent-free for the rest of your life, though ownership transfers to the provider. This option is generally available to those aged 65 or older.
With a Drawdown Lifetime Mortgage, you receive an initial lump sum and have the option to access additional funds as needed. Interest is only charged on the amount you withdraw, making this a potentially more cost-effective choice.
For equity release plans, fixed interest rates remain constant for the duration of the agreement, providing you with certainty and stability regarding your repayments.
KYC stands for Know Your Customer, a process that financial institutions and lenders use to verify the identity of their clients. This is a critical step in preventing fraud and ensuring that services align with the customer's financial needs and situation. KYC typically involves collecting and verifying documents like identification, proof of address, and financial information.
When you take out a loan, interest starts to accrue on the borrowed amount. With compound interest, the interest owed is added to the original loan, meaning future interest is calculated on the new, more significant amount. Over time, this can significantly increase the total amount you owe.
If you choose to repay your lifetime mortgage early, you might incur an Early Repayment Charge (ERC). The specifics of this fee depend on your plan and lender, and ERCs can either be 'defined,' with charges decreasing over time, or 'gilt-based,' varying according to government borrowing rates.
Some equity release plans offer downsizing protection, allowing you to repay your plan early without incurring ERCs if you move to a less expensive property. The terms of this protection vary by lender.
A No Negative Equity Guarantee ensures that when your property is sold, neither you nor your estate will owe more than its value. This safeguard is included in all lifetime mortgages offered by members of the Equity Release Council.
Specific plans offer an Inheritance Guarantee, which allows you to protect a portion of your home's future value for your beneficiaries. This guaranteed amount will be passed on when the property is sold, regardless of the outstanding loan balance.
An Enhanced Lifetime Mortgage, also known as an impaired mortgage, may allow you to borrow more or secure a lower interest rate if you have certain health conditions.
If you need additional funds, a Further Advance allows you to borrow more money through your existing equity release plan, subject to your lender's criteria.
An Emergency Fund is an available sum of money to cover unexpected costs, such as urgent repairs or large bills.
Before your loan is approved, an independent surveyor will assess your property to confirm its value. This valuation helps the lender determine the amount you can borrow.
Anyone over 17 living in your home who isn't part of the equity release plan may need to sign a Waiver of Occupancy. This document acknowledges that their right to reside in the property ends when the plan concludes, allowing the home to be sold and the loan repaid.
Your estate includes everything you own at your death, minus any debts, including those from an equity release plan. Remember, equity release will reduce the value of your estate.
With Joint Tenancy, two or more people own the home equally. Upon the death of one owner, their share automatically passes to the surviving owner(s).
Under Tenancy in Common, two or more people can own different percentages of a property. Upon death, an owner's share does not automatically transfer to the other owners but becomes part of their estate.
A Power of Attorney is a legal document that grants someone else the authority to make financial or medical decisions on your behalf. Establishing this while you still have the mental capacity is essential, as it can prevent complications later on.
The Key Facts Illustration (KFI) is a document provided by your lender that outlines the terms and conditions of your equity release plan. All KFIs follow a standardized format, making it easier to compare different offers.
After your application is approved and the property valuation is completed, you'll receive an Offer Document. This outlines the specifics of your plan and any changes since your KFI was issued.
Many equity release plans are portable, meaning you can transfer your plan to a new property if you decide to move, provided the new home meets the lender's requirements.
A RIO mortgage requires you to make monthly interest payments. The loan itself is repaid when you sell your property, move into long-term care, or pass away. You must prove you can afford the ongoing interest payments.
Leasehold refers to owning a property but not the land it's built on, usually for a set period under a lease agreement. Lenders often require the lease to last for a certain number of years to qualify for equity release.
If you need someone else to manage your equity release on your behalf, they would be considered a Third Party. You must give permission for this, and there are specific areas of the process that a third party can handle.
The Right to Remain ensures you can continue living in your home until the end of your equity release plan, usually until your death or a move into long-term care, as long as you adhere to the plan's conditions.
Variable rate plans feature interest rates that can change over time based on market conditions. These plans often start with lower interest rates, but the rate can fluctuate annually.
A Lump Sum plan allows you to take out your equity release money in one single payment, giving you access to the full amount immediately.
Prevailing rates refer to the current interest rate available at a given time. If you have a drawdown plan, any additional funds you withdraw in the future will be subject to the prevailing rates at that time, which may differ from your initial rate.
LTV stands for Loan to Value, which is the percentage of your property's value that you borrow. For example, if you borrow £30,000 against a property worth £100,000, your LTV is 30%.
Disbursements are costs incurred by your solicitor on your behalf, such as fees for property surveys or land registry searches. These are typically in addition to the solicitor's basic fees.
During the property survey, the surveyor may identify necessary repairs. The lender may hold back some funds until these repairs are completed, or they might require you to agree to complete them within a specific timeframe.
Some equity release plans offer an ERC exemption, allowing joint customers to repay their equity release without penalty if one partner passes away or moves into long-term care within a set period.
An Up/Down Valuation refers to a property valuation that is higher or lower than expected. This may affect the amount you can borrow or the interest rate offered by the lender.
The Equity Release Council is the industry body that ensures members maintain high standards of integrity and transparency in dealing with customers. Our company is proud to be a member of this organization.
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This information is a guide only and should not be relied on as a recommendation or advice that any particular Equity Release product is suitable for you.
