The Question
I’m semi-retired and unlikely to give up work soon as I doubt my measly pension will cover my living costs. I am wondering if equity release may be a good idea as I have no mortgage on my house and am aged 67, so I think I should qualify.
Please can you explain if I have to make repayments and, if so, how much they might be? Does it work on an interest-only basis? Thanks for any help you can provide.
Mark’s Answer
Hello, and I am delighted to be able to help you and provide you with some feedback. The basic eligibility for equity release is that you must be at least 55 and your property value must be worth at least £70,000. Assuming your home is worth more than £70,000 you are likely to be eligible for equity release.
To consider your options in detail, I recommend that you ring our freephone number on 0800 802 1051, or use our free Livechat facility and talk to one of our independent equity release experts without obligation who will help and guide you on the best solution for your circumstances.
However, I am happy to provide you with an overview of the choices you have, so I will begin with interest-only.
Firstly, depending on how much capital you need for your objectives, and your income in retirement you may be eligible for a Retirement Interest Only (RIO) mortgage. With this plan you would borrow capital that you can retain until you either pass away or enter into long-term care, and you agree to pay interest for the rest of your life.
This interest could be fixed for a term, or the whole of your life, or similarly a discounted interest rate for a term. The provider will stress test your income to ensure the loan is affordable for the rest of your life, and once they release the capital you will agree to pay the income until the funds are eventually repaid – usually on death or moving into long term care.
Secondly, again depending on your objectives and how much capital you need to raise, you may be eligible for a flexible Lifetime mortgage. Similar to a RIO mortgage the provider will lend you the capital for the rest of your life or until you need long-term care.
However, with a Lifetime mortgage, the payments you make are voluntary and flexible – hence your eligibility is not based on your income, but by how old you are, how much you want to borrow and the value of your home.
The Lifetime mortgage will attract a fixed interest rate for your lifetime, and you have the choice to make no payments, make partial or full interest payments, or pay up to 10% of the initial capital back each year.
The decision to make payments is yours, though if you do not make payments the interest will be added to your loan each year, and will compound until it is repaid, which could mean a reduction in the property equity or no property equity from the sale of your home for your beneficiaries.
Making flexible payments whether full, partial or ad hoc will have a positive impact for your estate, but the choice is yours. Our expert advisers will guide you and provide you with a full disclosure of how the interest will increase if you do not make payments, so it is clear for you and your estate.
Thirdly, you may be eligible for a home reversion plan where you can sell a percentage, or all of your home to a provider to obtain a cash lump sum. Once you have sold a share or all of your home, you have the right to live in your home until you need long-term care or pass away.
There is no interest and you do not have to make payments, though you will not retain full ownership of your home.
As you will see there are many choices for you within these plans, so I would strongly suggest you take advice and what better place to start than with an independent whole of market specialist who has access to all options without obligation and our specialists are waiting to hear from you.
Meet our expert…
Mark Gregory, founder and CEO of Equity Release Supermarket, is here to answer your questions. Mark is an adviser himself with over 20 years equity release experience.
He launched Equity Release Supermarket 10 years ago and it has grown to become one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask Mark a question
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