Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Buying a new home with Equity Release

Most people see Equity Release as a way to raise money against the value of their homes. In most cases, that’s exactly what happens when you take out a Lifetime Mortgage. There are different lending terms and conditions with a Lifetime Mortgage, for instance, the maximum loan to values (LTVs) are lower than in the conventional mortgage market and there’s a minimum age requirement, 55 for the younger applicant. Please see the page in the menu above “How much can I borrow?” to get an idea how much you could raise today.

Another restriction is the property to be mortgaged must be your primary residence, again no different from a mortgage you might have had in your earlier life. However, what many people miss is the fact you could be moving into a new permanent home and you can use a Lifetime Mortgage to help buy it! We call this a “purchase case”.

Let’s look at an example to illustrate the point.

Mr and Mrs Jones are in their sixties and are in the process of selling their family home of 30 years. Like many people at their time of life, they still have a mortgage and have calculated that once the house is sold, and the mortgage and all the sale costs are met, they’ll have £190,000 free and clear to buy their next property.

Where they live they have a wide choice of three bedroomed semi-detached property but they’ve seen a bungalow in an area they’ve always wanted to live. The problem is the purchase price of £220,000 is more than they can afford, and they don’t want to be increasing their outgoings in retirement.

This can be done with a Lifetime Mortgage. Taking the younger life as 65 and looking at the table on the “How much can I borrow?” page, you’ll see the maximum would be:

£220,000 X 38% = £83,600.

They already have £190,000 available so would only need £30,000 more plus moving and new setup costs etc, another £7,000 for example, making a total of £37,000.

A Lifetime mortgage of £37,000 would get them into their bungalow, subject to valuation and terms and conditions. They could choose to borrow a bit more immediately, to make the bungalow more their own, or they could leave the surplus in reserve to use as and when the need arises. Or they could say they don’t want to take any more and just settle with the single lump sum. The beauty is there’s no requirement to make any repayments unless they want to, so they can enjoy their new home without a monthly cost!

To give you an idea how the Lifetime Mortgage market is evolving, there’s one lender, or provider, that will consider a Lifetime Mortgage against a second home, subject to terms and conditions. There’s also a lender that will consider a Lifetime Mortgage based product that can be secured against a Buy to Let (BTL) property. By definition, this product has to be secured on a property the customer does not and will not live in.

With over 300 plans available, it’s vital you get independent specialist advice from a qualified Equity Release adviser. They will take your personal circumstances and needs into consideration and recommend the plan that represents the best value for money whilst meeting your individual requirements.

Please use the contact form, link above on the menu, to get in touch so I can provide more details.