Are equity release mortgages good or bad?

Tuesday, 11th December, 2018
equity release

The simple answer to what is a rather broad question is that it all depends on where you are in life in terms of finance, goals and objectives.

What can’t be avoided, however, is that the equity release mortgage is growing in popularity.

According to the latest Equity Release Council figures, homeowners released over £1bn of equity from their homes in the third quarter of 2018 – and £11m of property wealth is being ‘cashed in’ on a daily basis. As a Guildford mortgage broker we’ve certainly seen equity release mortgage applications rise.

Whilst the figures are compelling, we are regularly asked, ‘Is releasing equity in my property a good thing?’ So, to help you make your own mind up, we’ve provided a list of equity release pros and cons.

However, before we look at the fors and against equity release, let’s start by briefly explaining how equity release works (note: for a more in-depth equity release mortgage Q&A click here).

What is equity release?

If you’re a homeowner aged over 55, equity release enables you to release money from your property – without having to move. You can take a lump sum, as a drawdown (taking smaller amounts at different times) or as a home reversion plan (selling part of your property to the lender in exchange for money).

The pros 

1. Staying put

If you don’t want to leave your property, but need more money in order to continue living there, then equity release mortgages enable you to stay where you are whilst providing you with the funds required to do so.

2. No negative equity – guaranteed

Lenders who are members of the Equity Release Council – and Complete Mortgages tends to only work with those that are – have to include a no negative equity guarantee, which means that if there ever was a crash and the value of the property became less that the value owed, the lender would cover it, not you.

3. Beat inheritance tax

Nobody really likes the idea of being taxed on inheritance, so releasing equity against the value of your property can represent a way in which to pass on your wealth in a tax efficient way.

The cons

1. Compound interest

Equity release mortgages do not work in the same way as residential mortgages. Whereas homeowners with residential mortgages typically pay off the interest charges on a monthly basis, equity release mortgage interest is typically added to the overall debt. This means that the outstanding equity release mortgage balance can rise quickly.

2. Hard to go back

If you thought early repayment charges on fixed mortgages were high, then you might be surprised to learn that early repayment charges on equity release mortgages can be as high as a quarter of the amount borrowed. As a result, you need to be absolutely sure that equity release is for you before going down that route – and also that your mortgage broker goes through everything with you in detail.

3. Benefit or no benefit?

Those who receive means-tested benefits may find that a sudden cash injection results in these being taken away. Make sure you understand the wider financial implications before committing to a long-term decision.

Still not sure? Why not contact the Complete Mortgages team to find out more on 01483 238280 or by emailing info@complete-mortgages.co.uk.

Complete Mortgages also specialises in other mortgages over and above equity release mortgages. We can also arrange mortgages for the self-employed, mortgages for teachers, adverse credit mortgages, buy to let mortgages and limited company buy to let mortgages.

By Mark Finnegan, Director at Complete Mortgages

How to get the best equity release mortgage advice

Thursday, 24th May, 2018

Equity release mortgages have well and truly arrived.

As recently pointed out in our last equity release article, which includes a five point guide as to what you need to know about equity release loans, it is estimated that the value of UK equity release mortgages increased by £10bn last year.

However, it’s important to note that wherever there’s an opportunity, there are always opportunists, which was my first thought on recently watching a series of equity release adverts on TV.

One advert was proudly selling access to equity release mortgages for a fee of ‘only’ 1.95%. Whilst this doesn’t sound that high, it typically equates to around £1,395 – £1,495, which is, in fact, a relatively high charge.

As a Guildford mortgage brokerage that specialises in helping our clients to get an equity release mortgage, we believe that our fees are much fairer and transparent. For example, our flat fee structure means that we can help you apply for an equity release mortgage for only £699 – regardless of the complexity of the mortgage and value of the loan amount.

What’s more, our team of Guildford mortgage brokers now includes three equity release specialists. All three advisers have secured the highly coveted Certificate in Regulated Equity Release (CeRER) qualification, which ensures that Complete Mortgages can offer a wider selection of equity release mortgages to a wider section of the population.

It also means that we can help those who have traditionally taken out interest-only mortgages – and who are on an interest-only mortgage right now – to transition to an equity release deal without having to refer to a third party.

Whether you’re currently on an interest-only mortgage and thinking of switching over to equity release, or you’re simply considering your options and think that equity release could be a route you’d like to take, the first thing you need to do is contact a trusted – and qualified – mortgage brokerage.

Why not contact us to find out more on 01483 238280 or by emailing info@complete-mortgages.co.uk.

Complete Mortgages also specialises in other mortgages over and above equity release mortgages. We can also arrange mortgages for self-employed people, mortgages for teachers, adverse credit mortgages, buy to let mortgages and limited company buy to let mortgages.

By Mark Lucas, Equity Release Adviser at Complete Mortgages

What is an equity release mortgage?

Tuesday, 6th March, 2018
lifetime_mortgage

It’s a big year for equity release mortgages.

In fact, estimates by one UK equity release specialist suggest that the value of UK equity release mortgages increased by a staggering £10bn last year.

So, what’s happening?

Essentially, the cost of living has grown whilst wage growth has slowed down. However, as we all know, the one thing that has also grown over recent decades is property prices, the result of which means that those who have owned a home for many years have amassed significant equity.

However, what good is equity when a) it’s locked within bricks and mortar and b) you could do with the money right now?

It seems as though the UK’s public is asking similar questions.

The Equity Release Council has revealed that the total amount of housing wealth unlocked by the over 55s reached £3.06bn in 2017; the first time equity release lending has exceeded £3bn in a single year.

And the appetite for equity release borrowing shows no signs of slowing down as Legal and General research highlights how one in five homeowners would consider using equity release as a way in which to unlock funds.

As a mortgage adviser in Guildford we are seeing more and more people apply for an equity release mortgage. There was a time when only a handful of people would consider this approach. However, as people increasingly live longer and money needs to stretch further, homeowners are now viewing equity release mortgages as a viable way in which to continue enjoying a high quality of life without making compromises.

Although before you consider it an option you’ll need to know how it works, so here are five things to know about equity release mortgages.

1. What is equity release?

A way of freeing up money tied up in your property as equity. You can spend it however you wish and there are no mortgage payments to make; the lender is repaid through the sale of your property.

2. Who can access equity release deals?

Those over 55 – all the way up to 95 – and who typically own a property worth £70,000 and above.

3. Can I still benefit from equity release if I currently have a mortgage?

Yes, as long as the funds you release can clear any outstanding borrowing.

4. Is equity release safe?

The Financial Conduct Authority regulates equity release, however, you should make sure that the lender is a member of the Equity Release Council, which can help ensure that you don’t find yourself owing more than the value of the property at the end of the term.

5. Will I need to move?

Not at all. You can downsize in order to release equity but if you would rather not move, then this could be a win-win situation. Some lifetime mortgages now allow you to manage interest charges by making monthly repayments.  Or, instead of making monthly mortgage repayments, the interest can be rolled up and, when the plan finishes, the interest plus the original loan is paid pack to the lender via the sale of the property.  If you are moving home, many of the plans are portable.  The only thing to consider here is that it will decrease the value of your estate.

Still need more information? We understand that equity release is a big decision. So, for expert advice and guidance from a team of award winning mortgage advisers and equity release experts contact 01483 238280 or email info@complete-mortgages.co.uk.

By Mark Finnegan, Director at Complete Mortgages

Equity release. It could be in your interest.

Monday, 6th June, 2016
home reversion

It’s funny how things change. Sometimes it seems to happen in the blink of an eye. At least that’s how it felt when interest-only mortgages became less common (not to mention less available) as people decided that it probably was a good idea to make monthly repayments rather than put off paying back their mortgage until a later date.

Of course, the well-documented financial crisis played no small part in this shift in attitude, bringing the long-term picture – or the lack of it for some people – into sharp focus.

But interest-only mortgages dominated the mortgage market for many years, and that’s many years whereby homeowners didn’t ‘chip off’ their mortgage capital, instead favouring to bet on growing property prices that, when the time came, would enable them to pay off their debt by either downsizing or remortgaging.

Well, for many that time has come (or is at least around the corner). Interest-only mortgages are maturing and it’s this realisation that has promoted a rise in equity release mortgages – or lump sum equity release plans.

The good news is that those who bet on the continued growth of the property market won’t be disappointed; property prices have increased significantly, generating wealth for the majority of UK homeowners.

Similarly, figures from the Equity Release Council* revealed how the value of equity release lending has also increased, having amounted to almost £394m in the first quarter of 2016, a increase of 21% year-on-year and the highest quarter one lending figure ever recorded. And the fact that over 5,000 equity release plans were arranged during that same period indicates that it’s only going to grow in popularity.

Quite simply, equity release deals enable homeowners to ‘extract’ the value from their property and pay the bank the remaining balance on the mortgage. And when you consider that the Financial Conduct Authority places the average shortfall owned by interest-only mortgage customers at £71,000**, then this approach to freeing up capital is likely to become a popular option for a number of homeowners.

So, what are your options? Well, there are generally two: lifetime mortgages and home reversion.

Lifetime mortgage

With this option, you take out a mortgage secured on your property and ring-fence some of the value of the property as inheritance for your family – or you can choose to make repayments or let the interest roll up. The loan amount is then paid back when you pass on or when you move into full time care.

Home reversion

Here, you sell part of – or all of – your property in return for a lump sum. You are still entitled to live in the house and in the event of death, the property is sold and the proceeds are shared based on the ownership agreement.

Of course, we appreciate that this is a significant topic and one that you will need to research fully before making a decision. Also, it’s important to remember that equity release products only apply to those aged 55 and over. So, if you’re thinking of applying for an equity release mortgage then contact a member of the Complete Mortgages team on 01483 238280 or email info@complete-mortgages.co.uk.

Complete Mortgages also specialises in a wide range of mortgages, from equity release to first time buyer mortgages and commercial mortgages through to bridging loans.

*http://www.equityreleasecouncil.com

**http://www.theguardian.com

The Rise in Equity Release

Monday, 18th May, 2015

The election is over and the uncertainty that often dominates in the lead up to it has dissipated.  And that’s a good thing.  Not only will the markets start moving again, but also homeowners will, too.

However one area of the financial services sector that seems to have been unaffected by the election is equity release*.  In fact, according to figures from the Equity Release Council, the equity release sector has grown by 3% in the first quarter of 2015 when compared with the same time last year.

But what does it mean? And, more importantly, what is equity release and how can it help you? As a whole of market mortgage adviser and equity release specialist, Complete Mortgages is well placed to advise on what it is and how it might work for you. As a starting point, here are five points to help you get to grips with how you can free up money without having to sell your property or move.

1. What is equity release?

Equity release mortgages allow homeowners aged 55 and over to free up equity from their property (or properties). If you’ve heard the phrase ‘asset rich, cash poor’, then you’ll understand that cash tied up in property is very different from cash in the bank. Those who require access to money can secure a lifetime mortgage and access between £10,000 and their maximum allowance.

2. Is the interest rate higher than typical mortgages?

Yes, however it’s a fixed rate for the lifetime of the mortgage. At present, those looking to secure an equity release mortgage can find rates around the 5% mark.

3. But what about paying it back?

Equity release mortgage holders can wait for the interest to accrue and then pay it back in one lump sum when the property is sold or when that person’s estate is sold after they have passed away. Alternatively, for those who want to pay back the debt whilst alive and owning the property, there is an option to make flexible payments or make on-going monthly payments.

4. Is it a flash in the pan?

No. At least figures to date would suggest not. The market is currently growing with predictions that it will be worth £2bn next year. After all, we’re not getting any younger however we’re certainly getting older – and living for a lot longer, too.

5. I’m interested, but what do I do next?

Our advice would be to contact a reputable – and whole of market – mortgage adviser, as they will have access to an array of products for you to choose from that can support you and your lifestyle. Complete Mortgages is arranging more and more equity release mortgages and our experience of this type of mortgage combined with our unlimited access to the mortgage market’s products means that we’d be able to guide, advise and, if relevant, secure a mortgage that’s right for you.

For more information on equity release mortgages or for specialist mortgage advice, get in touch on 01483 238280, email info@complete-mortgages.co.uk or visit http://complete-mortgages.co.uk/mortgages/equity-release/.

*This is a Lifetime Mortgage or Home Reversion Plan.  To understand the features and risks, ask for a personalised illustration.

By Mark Finnegan, Director at Complete Mortgages in Guildford

Making your equity work for you

Wednesday, 27th August, 2014

So, you’re looking to raise money. Whether it’s for improvements to your home, the purchase of a second property or helping a family member buy a home you would like access to a sizeable amount of money. And quick.

The good news is that if you have a ‘healthy’ amount of equity in your property then converting it into cash shouldn’t be too difficult. But how do you go about releasing equity from a property that you’ve owned for some time?

It’s very simple. There are a number of equity mortgages (sometimes known as equity release or lifetime mortgages) currently on the market.

The two main types of equity release scheme are lifetime mortgages and home reversion plans. In both cases, when it comes to releasing equity from your property, it’s really important that you take advice from a specialist as this approach could have a number of implications.

As a Guildford mortgage broker we have access to the largest portfolio of mortgage products on the market and are here to find you the best mortgage rates. We also want to give you the best mortgage advice so that whatever product or approach you take, it’s one that suits your needs and lifestyle both on a short and long-term basis.

As a starting point we thought we’d provide you with a quick introduction to equity release mortgages. Common questions that we receive include:

Q) What age do I need to be to qualify for an equity release mortgage?

Equity release mortgages are typically designed for older homeowners who perhaps are unable to take on a regular mortgage and whose income level may prove difficult for them to make regular repayments. Typically speaking, the minimum age is 55 for lifetime mortgages and 60 on reversion plans.

Q) What’s the difference between a lifetime mortgage and a home reversion plan?

Lifetime mortgages allow you to take out a loan on a property in return for a lump sum. You still own the property without having to make monthly or regular repayments; the loan is repaid when you die or when you enter long-term care. The Money Advice Service has demonstrated that a £45,000 loan taken out at a rate of five per cent will have grown to £57,433 after five years and to £93,552 after 15 years. Should you live for a further 25 years after taking out the loan you would need to repay a total of £152,387.

Alternatively, a home reversion scheme would see you sell part (or all, in some cases) of your home to a company in exchange for a lump sum. When the property is eventually sold you or your estate receive the percentage of the property owned by you. In effect, by taking out a reversion plan you become a tenant in your own property.

Q) How much can I borrow?

As you would probably expect, this depends on a number of elements such as the value of your property and your age. On lifetime mortgages the maximum loan is typically around 36 per cent of a property’s value for a 70 year old or 50 per cent for a 90 year old. On reversion plans you can sell 100 per cent of your property and what you get in return depends on your age, with younger people typically getting offered less than their older counterparts.

Q) Sounds great. How do I apply?

Firstly, equity release schemes such as these are a big deal. So, in order to help you come to an informed decision the team at Complete Mortgages would always advise you to pop in and discuss it with a member of the team.

If you’re still unclear or would like more advice on how to make an equity release mortgage work for you then simply call us on 01483 238280 or email us at info@complete-mortgages.co.uk.