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EQUITY RELEASE

An equity release mortgage can provide a range of benefits for those aged over 55 who are looking to access the value tied up in their property. These mortgages allow homeowners to release equity from their home without having to sell it or move out. The funds can be used to supplement income, make home improvements, pay for healthcare, or any other financial needs.

Additionally, an equity release mortgage can be a valuable tool for those who want to provide a gift for their loved ones or pay off debts. One of the key benefits is that the mortgage is repaid when the homeowner dies or moves into long-term care, which means that the homeowner can enjoy the benefits of the released equity without having to make monthly repayments.

Overall, an equity release mortgage can provide a flexible and practical solution for those who are asset-rich but cash-poor in retirement.

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Types of Equity Release

For borrowers aged over 55, there are two types of equity release mortgages; lifetime mortgages and home reversion plans.
A lifetime mortgage releases equity but is designed to ensure that clients can continue living in their home for the rest of their life or until they move into long-term care. One advantage of a lifetime mortgage is that it is also possible to move the loan to a new property, so long as the new home satisfies the lender’s requirements.

Alternatively, home reversion plans are also available. However, these are fairly uncommon nowadays and are restricted to clients over 60 or in some cases, over 65. All or some of the property is sold to a home reversion provider and in return, clients will either receive a lump sum or regular payments for the value of the portion sold.

There are multiple benefits of equity release for retirees. Borrowers may use the finance for:

  • Paying off an existing mortgage
  • Funding significant home and/or garden improvements
  • Inheritance tax planning and gifting money to loved ones
  • Paying off remaining debts
  • Boosting income in retirement
  • Funding holiday and large one-off purchases.

For clients looking to explore equity release mortgages, the maximum amount you can borrow is typically up to 60% of the value of your home. However, Diamond Property Finance are experts in securing more in certain circumstances. Eligibility for equity release will depend upon your age, the value of your property and the state of your health.

The Equity Release Process

Considering an equity release mortgage can be daunting, but we’re here to help. As experienced later-life lending experts, we’ll take time to understand your need for finance and then work closely with you, your family and equity release lenders to secure finance in your golden years.

  • This process is ideal for borrowers aged over 55.
  • The loan is repaid once the homeowner sells the property, moves into long-term care or passes away.
  • Can be used for inheritance tax planning, debt repayment or significant home improvements.

FREQUENTLY ASKED QUESTIONS

How does equity release mortgage work?

An equity release mortgage is a financial product that allows homeowners, typically those aged 55 and older, to unlock the value tied up in their property. Instead of selling the property, individuals can borrow against its equity, either through a lump sum or regular payments. The loan is repaid, along with accumulated interest, when the homeowner sells the property, moves into long-term care, or passes away.

Is it better to remortgage or release equity?

Deciding between remortgaging and releasing equity depends on individual circumstances. Remortgaging involves replacing the current mortgage with a new one, potentially accessing a lower interest rate. Equity release, on the other hand, allows access to cash without monthly repayments. The choice hinges on factors like financial goals, age, health, and the desire for ongoing repayments.

How to release equity from mortgage?

To release equity from a mortgage, one can consider:

Research Options: Explore equity release products, such as lifetime mortgages or home reversion plans.

Seek Professional Advice: Consult a financial advisor experienced in equity release for personalised guidance.

Compare Offers: Evaluate different equity release providers and their terms.

Understand Implications: Be aware of the impact on inheritance, benefits, and future property value.

Legal Process: Engage solicitors for legal processes involved in releasing equity.

What is the difference between equity release and a lifetime mortgage?

The main difference lies in ownership. Equity release encompasses both lifetime mortgages and home reversion plans. A lifetime mortgage allows homeowners to borrow against the property’s value while retaining ownership. Home reversion involves selling a share of the property, and forfeiting full ownership. Both options enable accessing equity without the need for immediate repayments, making them suitable for older homeowners.