Equity Release | What Are The Risks?

If you are possibly considering taking some form of equity release mortgage, it is understandable that you will want to know what the risks are.

Equity Release Mortgages in Lincoln may not be suitable for everyone so it is important that you get proper specialist advice in Lincoln before making any arrangements. Most people’s concerns fall into the following categories:

• Can I lose my house?
• How long will I able to remain in my home?
• What about my family and their inheritance?

Can I lose my house?

With a traditional mortgage, lenders have the right to take possession of a property should the borrower fail to keep up regular monthly repayments. However, since most equity release schemes don’t require a monthly repayment, then this question of “affordability” becomes irrelevant.

With a Lifetime Mortgage, your interest would normally “roll up” so there should be no reason why you would lose your property to a lender.

Historically there have been instances where lenders took possession of properties but these days this type of lending is highly regulated and the industry works hard to avoid circumstances where repossession is required.

How long will I able to remain in my home?

The terms of your agreement would normally allow you to stay in the property until you die. If your circumstances changed – for example, you needed to go into long term care – then the property would normally be sold.

With a Lifetime Mortgage, the lender would then be repaid all capital plus any rolled up interest from the sale proceeds and you would retain any excess over this amount.

If you have a Home Reversion Plan, you would have already sold the home to the provider, so in these circumstances, they would then sell the property on the open market and keep all proceeds.

This is one reason why it is important to understand the difference in the type of plan, so make sure your advisor goes through these fully and clearly before making any commitment.

What about my family and their inheritance?

With Lifetime Mortgages, upon your demise, the property would be sold and the capital, plus all accumulated interest would be paid back to the provider from the sale proceeds to settle their mortgage.

The difference between the sale price and the settlement figure would then go into your estate to form part of your inheritance. People often ask: “What if the debt has increased above the value of the property? Will my family have a debt to pay back?” However, you would normally receive a “No Negative Equity Guarantee” which, in simple terms, means that if the above occurred, then that is a risk the lender would have to take and there would be no further repayment required from your family.

Finally, should you have any further concerns, there is an industry body known as The Equity Release Council which exists to ensure that all products of this type are safe and accessible.

All participants in the Equity Release Market should subscribe to the Council’s Statement of Principles which you can check on their website – https://www.equityreleasecouncil.com – along with any other details that may concern you.

In a nutshell, therefore, as long as you ensure that you obtain advice from a firm whose advisors are members of the Equity Release Council, and who recommended products from providers who are also members, then you can be confident that you will receive full, clear information about any worries you may have.

At Lincolnmoneyman.com, we have a history of providing you with bespoke, detailed, local mortgage advice as to what may be the most suitable way forward in your particular circumstances.

To add to this service, we’ve now teamed up with an Equity Release Specialist and between us, we’d be happy to come to meet you in the comfort of your own home to answer any questions you may have on anything mentioned above by way of a free consultation.

Equity Release – How Can it Help Me?

Equity Release – How can it help me?  Equity Release mortgages can help people in a number of ways. Many people have heard of them, but are unsure as to whether they would be eligible and what benefits they may obtain, so in this article, we’re going to look at:

• Who can qualify for Equity Release Mortgages?
• How much equity do I need in the property?
• What purposes can I raise the money for?

Who can qualify for Equity Release Mortgages?

Firstly, your “equity” can be summarised as the value of your stake vested in the bricks and mortar of the property. So, if you already own your home, then your “equity” is the open market value of your house less the balance of any mortgage outstanding on it. If you’re a buyer, your “equity” is the amount of cash deposit you are putting into the transaction.

Secondly, Equity release Mortgages are aimed at older borrowers. Thus, you’d need to be at least 55 years old to be considered for an Equity Release plan and for some types that increase to age 60.

In general, it’s fair to say that the older you are, the better terms you’re likely to be offered from a lender. Other factors that would be considered in a traditional mortgage application, however – for example, earned income, pension income, number of dependents etc. – do not come into it. It is purely base on the value of your property.

How much equity do I need in the property?

The answer to this question is not entirely straightforward. Put simply, the amount you can borrow on this type of deal will be dictated by a combination of how old you are and how much equity you have?

Most providers have their own calculators and these can vary, but it’s fair to say the older you are, the more equity can be released. Your Equity Release Advisor will be able to accurately calculate this figure for you when you meet up.

What purposes can I raise the money for?

The uses of Equity Release are many and varied, here are just a few examples:

• Pay off an existing mortgage – for example, if you’re coming to the end of an interest-only deal
• Helping a family member – perhaps to provide a deposit for their own home purchase. Indeed, many people see this as a way of helping family now rather than making them wait for their inheritance.
• Supplement a low pension to provide additional income
• Buy a new property
• Home improvements or alterations
• Pay off other debts/bills
• Buy a new car
• Pay for a carer to be provided in the home
• Holidays

In short, most legal reasons can be accommodated. Don’t forget, Equity Release mortgages are not necessarily suitable for everyone and in some of these instances there may be other, more suitable courses of action, but your Advisor will help you with this.

At Lincolnmoneyman.com, we have a history of providing you with bespoke, detailed, local mortgage advice as to what may be the most suitable way forward in your particular circumstances.

To add to this local service, we’ve now teamed up with Equity Release Advice in Lincoln and between us, we’d be happy to come to meet you in the comfort of your own home to discuss any questions you may have on anything mentioned above.