Essentially this where you release built up equity in your property, usually this is where a lender gives you tax free equity from your property as a lump sum this can be through a few options. The equity will be repaid once you die, sell your home, or go into long term care. Whereby on the sale of your property the lender is paid back for the equity – and the remainder is given to you, or your inheritors.
What are they different options for equity release?
Equity release is quite simply releasing the built-up equity within your home, for you to use it for personal reasons. The mortgage itself is usually paid upon your death or when you move into specialist care facilities.
A lifetime mortgage is usually an interest-based loan, whereby the borrower is not required to pay back interest monthly. However, the interest is added to the overall loan amount on an ongoing basis, so the amount you owe increases over time.
Essentially this means that you may not have much equity left in the property upon your death if the loan is taken out and not repaid over a long period of time.
There are usually options to repay the interest though as well as some the of loan amount. A good broker will be able to advise on the options that are available to you.
There are also specialist retirement mortgages, where you only pay the interest off monthly. The good thing about these mortgages is that the mortgage does not have an end date, so you don’t have to worry about paying off the loan amount by a set time.
Another good thing about this type of mortgage is that if you wanted to pay off some of the loans you can, as there is usually a set amount you can pay back each year without any early repayment charges.
A key thing to remember with any mortgage is key advice from the FCA (Financial Conduct Authority) “your home may be repossessed if you do not keep up with payments”.
Journey Mortgages is a specialist broker that can help you with equity release and more. Get in touch, and one of our friendly team with be happy to help you with your enquiry.
Attention: Late repayments can cause you serious money problems. For help go to moneyhelper.org.uk