Equity release offers retired homeowners a gateway to generate extra liquidity during their retirement. There are different ways to take equity release on property portfolio’s & also many equity release providers that allow you to customise how you want to release cash from your property.
Lifetime mortgage equity release is one of the most popular equity release options, but what are the features involved that must be considered?
Common features of lifetime mortgage equity release schemes: –
Even in retirement people wish to move to a new property; possible for health & disability reasons or merely they wish to downsize to raise additional capital for a multitude of needs. As long as the new property is of suitable security to your equity release provider, you can move the scheme under similar terms and conditions.
If the value of your new property is less than the previous one, you may need to repay a part of the loan to balance the outstanding ratio. On the other hand, if the value of the new property is higher than the older one, it could be possible to increase the equity release loan amount. This could be aided by any savings held & with the equity release club together all funds available.
Fixed rate of interest
With lifetime mortgage equity release, the rate of interest is fixed for the tenure of the loan. Therefore, even if the Bank of England decides to increase UK interest rates there will be no direct effect on the amount of interest charged on the mortgage. One point of note however concerns drawdown equity release schemes. The initial capital release is fixed for the rest of your life; however if a further withdrawal is taken from the equity release reserve facility, then this could be at a different fixed rate than the initial lump sum. Needless to say this will then be fixed also for the rest of your life.
No negative equity guarantee
By virtue of membership of Safe Home Income Plans (SHIP) comes the assurance of the no negative equity guarantee. This provides comfort of knowing that your beneficiaries can never be left with a debt as a direct result of taking out an equity release plan. The only additional debt they may incur could be the extra estate agents & solicitors fees incurred during the sale of their parent’s property. No additional liability can therefore be incurred & the equity release providers will not ask the borrower to compensate any further loss.
Again under SHIP rules, all equity release schemes can be repaid at any time. Nevertheless, as with any equity release mortgage the loan is designed to run for the rest of the applicant’s life. As such, most lenders have early repayment charges which must be borne in mind before any early repayment is undertaken. All outstanding loans, charges and interests are repaid after the borrower passes away. Until then, the borrower can retain complete ownership of the home but still have a legal charge of the property. This will be released once the sale of the property is undertaken & the charge relinquished.