MORTGAGES
Equity Release or a Lifetime Mortgage is a way of supporting yourself later in life by unlocking tax-free cash from the value of your home, without having to move out.
The loan and interest are repaid at the end of the mortgage term using the proceeds of your house’s sale when you die or move into long-term care.
Key Information
The minimum age you can take out a lifetime mortgage is usually 55. As life expectancy increases, the earlier you start the more costly it’ll be in the long run, especially if you don’t pay interest during the term of the lifetime mortgage.
Your age and the value of your property dictates the maximum percentage you can borrow.
Equity release can also be used for other purposes, such as home improvements, debt consolidation or supplementing retirement income. For any of these matters, we’re on hand to support you.
Benefits of Equity Release
- The money you receive from a lifetime mortgage loan is tax-free
- If you select a lifetime mortgage with a drawdown facility, you’ll be able to release extra cash to top up your retirement income on a regular basis
- There are no monthly interest repayments unless you choose a lifetime mortgage which allows you to make payments to keep the debt under control
- A no-negative equity guarantee means you will never owe more than the value of your home (offered by most lenders)
Things to think about
- Your loved ones will receive less or no inheritance
- You will need to pay early repayment charges should you decide to exit the scheme early . There will also be charges involved in arranging a lifetime mortgage, such as arrangement fees, legal costs and valuation fees
- The products have fixed interest rates which means interest will continue to accrue on the amount you borrow
- Any equity release loan may impact your tax position and eligibility for means-tested benefits like pension credit. When you take out a lifetime mortgage you agree to sell your property when you move out. So, there will be no property to pass to future generations. You may also be limited to what changes you can make to your home and may be required to keep it in good repair.
Retirement Interest Only (RIO)
This is very similar to equity release, however you’re able to retain full ownership of your property.
An RIO is designed specifically for older borrowers, typically aged 55 and over – like equity release. It allows you to borrow money against the value of your home with the loan repaid either when it’s sold, you move into long term care or pass away – exactly the same as equity release.
Key Information
- Interest Only: only the interest of the loan is payable, which keeps monthly payments lower compared to a traditional repayment mortgage
- No fixed term: there is no fixed term, the loan is repaid on a specific life event (as mentioned above)
- Borrowing is determined on income and expenditure rather than age. Income is mainly based on pension income and lenders will also consider income that is transferrable to your spouse upon death
Benefits
- Lower monthly payments as it’s Interest Only
- Retain Ownership: you remain the owner of the property, which is not the case with some equity release deals
- Flexibility: it allows you to release equity to fund purposes like home improvements, retirement income or other options without potentially having to downsize
Things to Think About
- Debt remains: as it’s interest only, the loan will still need to be repaid. Remember your home may be repossessed if you do not keep up repayments on your loan
- Inheritance impact: the loan will reduce the amount of inheritance that can be left (exactly the same as equity release)
- Income requirement: as it’s based on income, some people may struggle to obtain the amount they wish
- Interest rate: overall cost could be high over a long period (this depends on the interest rate charged. The rate is affected by factors such as the value of your home in relation to the amount of your loan)
- Equity release products may be more suitable for those who do not want to make repayments
Why choose Attivo Mortgage and Protection?
We talk you through the entire process, and with the whole of market for mortgage deals at our fingertips we can help you find the right solution for you, whether you’re looking to release funds to pay off debts, top up your retirement pot or help a loved one buy their first home. We are to here to help and support you and always have your best interests at heart.
Mortgage products can change or be withdrawn at any time and are subject to underwriting. To understand the features and risks, ask for a personalised illustration.
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