In our Equity Release FAQs we aim to answer your most pressing questions about equity release, a financial option that allows homeowners to access the value tied up in their property.
Whether you’re considering releasing equity to fund retirement, home improvements, or other expenses, we’ve compiled answers to the top 10 equity release FAQs to help you understand more about the possibilities.
If you have any queries that are not answered in our Equity Release Frequently Asked Questions please Contact Us
10 Equity Release FAQs
Table of Contents
- What is an equity release mortgage?
An equity release mortgage is a financial product that allows homeowners, typically those aged 55 and older, to access some of the value (equity) tied up in their property while still living there. It essentially involves borrowing against the value of your home, but unlike a regular mortgage, you don’t have to make regular payments.
- How does an equity release mortgage work?
Equity release mortgages work by allowing homeowners to take out a loan secured against the value of their property. This loan is typically repaid, along with accumulated interest, when the homeowner sells the property, moves into long-term care, or passes away.
- What are the eligibility criteria for obtaining an equity release mortgage?
What are the eligibility criteria for obtaining an equity release mortgage?
Eligibility criteria for equity release mortgages may vary depending on the provider, but typically include factors such as age (usually 55 or older), property value, and the homeowner’s health.
- Could I or my estate owe more than my home is worth?
Equity Release mortgages that meet the Equity Release Council’s Standards must feature a “no negative equity guarantee” which means that you or your estate will never owe more than your house is worth when it’s sold.
- What are the risks associated with equity release mortgages?
Risks associated with equity release mortgages include potential negative impacts on inheritance, the accrual of compound interest, potential early repayment charges, and the possibility of owing more than the value of the property over time.
- How much equity can I release from my home?
When you take out equity release, the amount of equity that can be released from a home depends on factors such as the property’s value, the homeowner’s age, and the specific terms of the equity release mortgage.
- Will I still own my home if I take out an equity release mortgage?
Yes, with a lifetime mortgage, you retain ownership of your home, but if you decide to sell, the mortgage will have to be paid off, including any interest accrued.
- How does the interest accrue on an equity release mortgage?
Interest on equity release mortgages accrue on a fixed rate basis, according to the terms of the mortgage. Interest may compound over time, meaning it’s added to the outstanding loan balance, increasing the amount owed over time.
- Can I repay an equity release mortgage early?
Some equity release mortgages may allow for early repayment, but this may incur early repayment charges or fees. It’s essential to review the terms of the mortgage agreement carefully.
- How does taking out an equity release mortgage affect inheritance and estate planning?
Taking out an equity release mortgage can reduce the value of your estate and potentially impact the inheritance you leave to your heirs. It’s crucial to consider the implications for inheritance and estate planning carefully before proceeding with an equity release mortgage.
Releasing Equity From Your Home
If you are aged 55+ and have equity in your home, you may be able to release some of it through equity release in the form of a lifetime mortgage to realise the ambitions you have for later in life.
Equity release plans can provide you with a lump sum that is secured against your home. Interest is charged when you borrow money in this way, and will depend on the equity release products that you can access.
Whatever your reasons for releasing equity from your home, it is important to seek professional financial advice. There are strict rules and criteria around the different types of equity release, which is regulated by the Financial Conduct Authority (FCA). The equity release sector is represented by the Equity Release Council, which exists to promote high standards of conduct and advice on equity release, safeguarding consumers.