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Equity Release Schemes
Equity release schemes are a range of products which allow homeowners aged 55+ and who have little or no mortgage, to safely release some equity from their property to improve their life without having to move.
All specialist equity release schemes offered by us are approved by the Equity Release Council (ERC), (www.equityreleasecouncil.com ), the industry body for the equity release sector. The ERC represents providers, qualified financial advisors, lawyers, intermediaries and surveyors who work in the equity release sector as well setting standards and safeguards to protect and reassure the consumer. ERC also incorporates the SHIP Safe Home Income Plan organisation (SHIP) Standards Board which was set up in 1991 by leading equity release providers and is dedicated to the protection the customer and promoting of safe home income and equity release products and services.
Such products offer you the following safeguards:
- You retain the right to remain in your home for as long as you choose.
- You have the freedom to move to another property, without financial penalty.
- You are guaranteed a cash lump sum payment or a regular income.
In the case of lifetime mortgages, you will never fall into negative equity, meaning that on death or moving into care, the loan plus interest can never exceed the value of your home even if house prices drop in the future.
Equity release schemes are tax free and can be used in many different ways to suit your personal needs, possibly to:
- Go on holiday or purchase a holiday home
- Pay for home improvements.
- Pay off debts.
- Buy a new car, motor home or caravan
- *Help your children who maybe struggling through the recession.
- *Help your grandchildren buy their first home
The list is endless.
*we strongly recommend that you obtain independent specialist advice on Inheritance tax or related tax issues, should you wish to release inheritance gifts early.
If you are under 55 we may still be able to help you raise money from you home with an ordinary mortgage or re-mortgage. If you would like to discuss ordinary mortgages please complete our online form and indicate that you are interested in ordinary mortgages and we will call you back.
Types of equity release schemes
Equity release schemes are either lifetime mortgages or home reversion plans
- lifetime mortgages - A lifetime mortgage is a special type of loan for people usually aged over 55, that allows you to release equity from your home by means of a secured loan, which you can either repay back each month on a interest only basis, or make no repayments at all and the interest will be rolled up and the total amount accumulated will be repaid only once the property is sold on your (or in the case of joint applications - their surviving partner's death or if you permanently move into care.
- home reversion plans - A home reversion scheme allows you to sell part or all of your property to a provider in return for either a lump sum or income and a lifetime right to remain living in your property. Your home, or the part of it you sell, will then belong to the investor, but you are allowed to carry on living in it until you die or move out and you or your estate will retain the value of any share not sold.
Which equity release scheme is right for me?
Whether equity release is right for you and which equity release scheme would be best, will depend on many factors including:
· your age
· the amount of money you need to raise
· your future plans
· any ongoing commitments you may have
· your general state of health
· the possibility of moving home
· your ongoing income needs
· whether you can afford to make monthly repayments ( an affordability assessment will be carried out to determine this by your equity release adviser)
· How you feel about the inheritance you wish to leave to your family, and how that will be reduced by equity release
· Your eligibility for state benefits and the potential impact of equity release. Read more about what the state provides.
· The alternatives to equity release. Read more about the alternatives here.
We would like to point out however, that all equity release products involve borrowing against, or selling all or part of your home, and may work out more expensive in the long term than downsizing to a smaller property, and may affect your entitlement to State benefits and grants. It will also reduce the amount of equity you can leave to beneficiaries.
Equity Release - What Costs Will I Incur?
The fees incurred in equity release will vary depending on the type of equity release scheme, product provider chosen and the value of your home. The following is an approximation of the costs you could expect. *Exact fees will always be confirmed in writing by each independent party before you agree to any plan.
To assess how much a Lifetime Mortgage or Home Reversion Plan provider will lend you, the lender will normally charge a valuation fee, which on a typical valuation of £250,000 you could expect to pay around *£250-275. This is the only fee payable at time of application.
To ensure you fully understand your commitment, any Equity Release Council (ERC) or SHIP approved equity release provider, will insist you appoint an independent solicitor. Typically you can expect to pay around *£500 inclusive of VAT and disbursements, but should you need to pay off an existing mortgage or make changes to the title deeds/ transfer of ownership they may charge a little more.
Solicitor fees will advise you if they require any fees upfront or whether they will be deducted from the equity release mortgage money they receive from the lender. It is important that you find a solicitor who is experienced in equity release if you want the plan to be completed as swiftly as possible. If you experience any problems in finding such a solicitor please let us know as we can introduce you to a solicitor who specialisesin Equity Release conveyancing.
Lenders Arrangement Fees
Roll Up Lifetime Mortgage lenders typically charge *£599 which can usually be added to the amount you are borrowing. Although if added it will increase the overall cost.
Home Reversion Plan providers do not normally charge for this as it is taken into account on what they offer you.
Interest Only Mortgage arrangement fees will vary depending on type of scheme chosen. Most lenders will usually allow this fee to be added to the loan but this will mean the overall cost will increase.
Our Advice Fee
For researching and arranging the best scheme for you, we will charge a fee on completion up to 2% of the amount released or facility arranged with a minimum of **£895. This will normally be deducted by your solicitor from any money they receive from the lender on completion and forwarded to us so you know that what you receive from the solicitor is all yours to use. (**an administration fee is incorporated into this of £195.00 which is due and payable direct to us, should you cancel or withdraw your application, once an application has been arranged).
With so many different types of lifetime mortgages, we would recommend that anyone considering releasing equity from their home should seek professional and impartial advice. If you would like to benefit from a free initial home consultation to find out more about a lifetime mortgages or the alternative home reversion plan, and to discuss whether or not an equity release scheme is indeed the right option for you; please complete our online form and we will call you back to arrange a suitable appointment with our specialist Equity Release Consultant Jan Nurden.