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Are Equity Release Mortgages a Good Idea?



Are Equity Release Mortgages a Good Idea?

Have you ever thought about accessing the money tied up in your home? If you're 55 or older, Equity Release could be the answer. It allows you to release some capital, either in one go or in smaller instalments, depending on what you need it for. You can continue to live in your home.

 

Is Equity Release Right for Me?


Equity Release might be worth considering if you're over 55, own your home, and are looking for a more comfortable retirement. However, it's crucial to weigh up the pros and cons carefully. Whilst it can provide immediate financial relief, it may impact the inheritance you leave behind for your loved ones.


There are two types of Equity Release Mortgages; Lifetime Mortgages and Home Reversion Plans.  Today I am focusing on Lifetime Mortgages, where you borrow money against your home's value. This mortgage is generally designed to be repaid after you pass away or move into long-term care (based on the remaining applicant, if it is a joint mortgage). If you do not have anyone to leave assets to, this option could suit you well. However, if leaving an inheritance is important to you, keep in mind that a Lifetime Mortgage might reduce what you are able to leave behind.

 

On the flip side, you might consider a Lifetime Mortgage Equity Release to support your family whilst you are still around. Whether it's helping grandchildren with university fees or assisting them in buying their first home, Equity Release offers flexibility in how you use the money.

 

The Advantages of Equity Release

 

Lifetime Mortgages come with several benefits:

 

  • You can access a lump sum of tax-free cash.

  • You get to stay in your own home.

  • A no-negative equity guarantee ensures that you or your estate will never owe more than the value of your home.

  • You have the option to protect a portion of your home's value for your loved ones.

  • You can make partial repayments over time, although early repayment charges may apply.

 

The main advantage is the immediate access to equity. Whether it's renovating your home, supporting your family, or fulfilling lifelong dreams like traveling the world, Equity Release can be used.

 

Additional Considerations

 

  • Your eligibility for means-tested state benefits could be affected.

  • Taking out any type of Equity Release might reduce the inheritance you leave behind.

  • If the value of your home drops, the percentage you own will also decrease.

  • As the mortgage balance grows, you could end up with little or nothing left in your estate.

  • You will still be responsible for bills and maintaining the upkeep of your home.

 

Are You Eligible?

 

To be eligible for any Equity Release, you typically need to:

 

  • Be at least 55 years old.

  • Own a property in England, Scotland, or Wales.

  • Apply for the Equity Release in the names of the people currently on the mortgage deeds.

  • Use the property as your main residence.

 

What Does It Cost?

 

Equity Release, specifically a Lifetime Mortgage, has an interest rate which will be based on the amount you are borrowing and property value. Other costs to consider are solicitor fees, independent legal advice fees, lender valuation or arrangement fees, and professional advice fees. The amount you pay will depend on the product and provider you choose.

 

Frequently Asked Questions



Can I sell my house if I have Equity Release?

If you have taken out a Lifetime Mortgage, yes, you can sell your house, but you may have early repayment charges. If you have taken out a Home Reversion Plan, you would need to consult with the provider, as they are the legal owners.

Is Equity Release based on income?

Can I pay back Equity Release?

How long does Equity Release take?

 


So, Are Equity Release Mortgages a Good Idea?

Equity Release can provide financial freedom in retirement, but it's essential to fully understand the implications before making a decision. If you are considering Equity Release, be sure to seek advice from a professional, to ensure it's the right choice for you.


An Equity Release qualified adviser will be able to go through all the options available to you and help you consider the implications for your individual circumstances.



 

At MRG Private Clients, we believe in providing our clients with personalised guidance and support when it comes to making important financial decisions. We are based in Medway, Kent but offer our specialist mortgage services nationwide. Learn more about our specialist mortgage services >

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