Equity release is a form of later life retirement lending that enables homeowners to release tax free equity from the value of their home. The reasons people release money is for a variety of reasons which include redeeming interest only mortgages whereby they have no repayment vehicles in place and the existing lender requires their money back, funding a more comfortable retirement, supporting loved ones or paying towards the cost of care to name a few.
To be considered for a lifetime mortgage, applicants must:
- Be over the age of 55
- Own their own home
- Property value must be over approximately £70,000.
In the main, lifetime mortgage lenders will base their criteria and how much you can release on age, health and property criteria.
It is important that for anyone considering a lifetime mortgage that they speak to a specialised adviser who is qualified in Equity Release and they will work with applicants to determine whether equity release is the right solution for them or whether there are any alternatives before considering a lifetime mortgage.
As part of that assessment, the adviser will carry out a means tested benefit calculation to clarify whether you are eligible for any state benefits to address your needs and also importantly, whether the impact of releasing equity will have a detrimental effect on means tested state benefits. They will also discuss with applicants preferences, the ins and out’s of plans and when a recommend is made, will provide the applicant with a mortgage illustration along with a suitability letter confirming all the details about the proposed lifetime mortgage.
An adviser will confirm and discuss all details about equity release, the costs, fees, and obligations on all parties and will gain commitment and understanding before any application is submitted.
At Flex Financial, we help applicants who are considering lifetime mortgages, discuss the benefits as well of any alternatives to equity release. This could be for example to look at eligible benefit entitlements or whether there are any local authority grants that clients may be entitled to to name a few alternatives.
We actively encourage applicants to discuss their intentions with their families and involve them throughout the process. We are approved with The Financial Conduct Authority and are also members of the Equity Release Council who continue to be the industry trade body, leading and setting high standards to drive industry standards higher and continue to provide quality, transparent and honest advice.
It is important to add that lifetime mortgages and equity release came under The Financial Conduct Authority remit in 2004 after claims of miss-selling and high interest rates to name a few areas of concern. However, we are pleased that since this time, Equity release is a specialist advice area and is now fully regulated with any adviser advising in this area to take an additional qualification along with continuing professional development. The Equity Release Council was set up in 1991 and governs the equity release market. We only recommend lifetime mortgage lenders who are approved with the Equity Release council as this gives applicants some particular safeguards such as the
- No negative equity guarantee
- For lifetime mortgages, interest rates must be fixed or if they are variable, there must be a cap(upper limit) which is fixed for the life of the loan
- You have the right to remain in your property for life or until you need to move into long term care, providing the property is your main residence
- You have the right to move to another property subject to the property being acceptable to the lender for continuing security
Lifetime mortgages now are so flexible and there is a host of options to applicants. For example, applicants can service the interest by making interest payments to reduce the rate of interest rolled up. There is also an option whereby applicants can take smaller lump sums upto a pre-agreed limit thus only paying interest on smaller amounts rather than the initial full lump sum.
Furthermore, applicants can even make overpayments upto a pre-agreed limit (typically 10%) without penalty. Lifetime mortgages are designed to be a long term solution, not a short term remedy, therefore with any of this, a specialist adviser will discuss all of this with applicants as part of the advice process.
Applicants must also seek independent legal advice, at this time, the solicitor will be provided with full details of the plan, including rights and obligations of both parties. Both the applicant and the solicitor will be required to sign a certificate confirming these rights and obligations have been explained and you wish to enter into the plan.
Canada Life who is one of the Lifetime mortgage lenders have a fantastic overview video shown below for a summary of the above.
To speak with a qualified adviser in confidence with no obligation to seek further information or clarity on whether Equity Release is right for them, please contact us on:
Telephone: 020 8133 6698