Equity Release – how does it work?

I’m often asked, “how does equity release work?” There are two forms of equity release.

Lifetime mortgage;

• • The loan is secured against your property and you retain ownership. You can protect a portion of the property for inheritance purposes.
  • Interest is charged and added to the balance, which is cleared when you (or the second applicant if the loan is in joint names) either pass away or move into long term care.
  • The property is then sold to clear the outstanding balance. You can have the option to clear some interest either monthly or at your choosing, to decrease the amount owed at the end. Anything left is then passed to your beneficiaries.
  • You can either take a lump sum or a drawdown facility, depending on how much you need and when and this can reduce the build-up of interest.
  • As a member of the Equity Release Council, you will have a no negative equity clause.
  • The older you are, the more money you can take out. Home reversion;
  • The property is sold to the finance provider who will provide either a lump sum of money of a monthly income.
  • You continue to live in the property either until you (or the second applicant if the finance is in joint names) either pass away or move into long term care. You will have a lifetime lease for the property.
  • The older you are, the more money can be released against the property value.

In both cases, it’s important for you to understand what impact releasing this money can have on your tax status and/or potential state and local authority benefit entitlement (both now and in the future).Before making any decisions, we will have discussed your current and future situation in detail. If you prefer this to involve family, friends or a solicitor, you are more than welcome to invite them to both our initial appointment and the recommendation appointment. Between the initial interview and the recommendation appointment, I will be researching the right provider and finance to suit you, your circumstances and needs.

Mortgage and Finance Arena are a team of independent, whole of market advisers who pride ourselves in offering straight forward mortgage and finance advice which you can trust. Visit their website here