Maintaining your current lifestyle becomes more complex as time passes. Some people may have to downsize their living arrangements and sell off their property to make ends meet.
But what if you’re not ready for it?
What if you want a simpler life, but don’t have the resources to make it happen? Fortunately, equity release and lifetime mortgages may be the option for seniors seeking financial assistance without losing their independence.
If you’re wondering if equity release and a lifetime mortgage is right for you, you’re in the right place; expert John Lawson walks us through the benefits of equity release.
What’s Equity Release?
Equity release refers to various products that allow you to access the equity (cash) locked up in your home if you are over the age of 55.
How Does Equity Release Work?
In exchange for a portion of the value of your home, you have the option of receiving the funds in a lump sum, in several smaller amounts, or a combination of the two.
This can be accomplished by opting for a lifetime mortgage or by selling all or a portion of your home below market value, known as a home reversion scheme. This comes with the guarantee that you can continue to live there for as long as you want.
For the sake of this article, we’ll be focusing solely on lifetime mortgages.
What’s a Lifetime Mortgage?
A lifetime mortgage is a loan secured against your home, as long as it’s your primary residence.
No repayments are required during your lifetime, and the interest is added to the loan balance and compounds. However, you’re more than welcome to start and stop making voluntary loan repayments whenever you wish.
Some lifetime mortgages provide you with a single lump-sum payment, whereas others allow you to access the money in instalments.
The advantage of a drawdown loan is that interest is only charged on the money you’ve already released from your equity.
Why Consider Equity Release & Lifetime Mortgages?
You may want to spend most of your retirement years travelling, or you can finally make those home improvements you’ve been putting off for years.
Or you may want to enjoy this time knowing that you and your family are financially secure.
This is something that a lifetime mortgage can help you with.
What’s the Benefit of Lifetime Mortgage Equity Release?
The top benefits of a lifetime mortgage equity release are:
- Lifetime mortgages with a no negative equity guarantee ensure you will never owe more than the value of your home.
- You can live in your house for the rest of your life.
- You are not required to make any repayments until you die or enter long-term care, but there are options for making interest and loan payments.
- Unlike a home reversion plan, in which you sell a portion of your home upfront, a lifetime mortgage allows you to keep ownership and benefit from future increases in property value.
- You have the option of repaying the loan sooner.
- Equity release can help you reduce the value of your estate, which can help you save money on Inheritance Tax.
How Long Does It Take to Release Equity?
A lifetime mortgage application typically takes 5 to 8 weeks to complete, but can be up to 12 weeks, depending on your circumstances.
The process entails a substantial amount of legal work, and the length of time it takes will be determined by how efficient and experienced your solicitor is. If you want to keep delays to a minimum, it may be worth your time to find a solicitor familiar with the legalities of equity release.
Is There an Alternative to Equity Release?
In many circumstances, there may be a better alternative to equity release.
Before signing on the dotted line, it is critical to seek equity release advice.
Releasing money by downsizing to a smaller home or relocating is the most common equity release alternative.
The equity release process can be perplexing, but it doesn’t have to be. It is a straightforward way for seniors to free up funds that they may not have known were available.
After all, who wouldn’t like to have more money in their pocket?
Before making any decisions about this type of senior financing, please consult with your trusted advisor or estate planning attorney to understand the risks involved.