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Mark Gregory, Founder and CEO at Equity Release Supermarket
www.equityreleasesupermarket.com
Tel: 0800 802 1051
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Question
How much can we borrow?
I wondered if you could please advise me on what kind of sum I would be allowed to borrow if my wife and I were to release equity from our home?
We have a four-bedroom property in an outer London suburb which is probably likely to be valued (according to Zoopla) at around £550,000. My wife is 70 and I am 74. We are both retired although my wife sometimes helps my daughter as a receptionist in her business, but she earns a small amount doing this. I receive £15k
We are keen to release money to gift to our three children to help them move/buy a home. But we are not sure how much we can release. Can you help please?
Answer
The maximum amount you are able to borrow with equity release depends upon three factors. These are the age of the youngest borrower for joint plans – in your case your wife who is 70. Lenders also consider the value of the property and its location.
Your income and outgoings are not part of the calculation when considering equity release plans.
A point I always make to clients looking to take the maximum amount is to be aware – the higher the loan-to-value (LTV) that you borrow, the higher the interest rate on your plan will be.
Additionally, only apply for the amount you actually need. If you don’t need the maximum lump sum, or you don’t need to take the full amount upfront, then look towards a drawdown plan that allows you to release equity over a period of time, thereby reducing the interest you will be charged.
At age 70 and with a property valued at £550,000, the maximum you could borrow is 47% of the value of your home – or £258,500. If either you or your wife have any pre-existing medical conditions, this could be enhanced to 54.5% – or £299,750 depending on the severity of those ailments.
We offer a comprehensive range of calculators on the Equity Release Supermarket website, which are free for you to use.
If you would like to see the range of plans that could meet your needs, and find out exactly how much you could borrow, then smartER is also available for you to use on our website.
It is the UK’s first equity release search engine and based upon your personal details, smartER will search the entire marketplace and present a shortlist of plans that could meet your needs.
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Question
What will happen to my equity release loan when I die?
Sorry to send such a morbid question but I am considering the option of equity release or a lifetime mortgage and wondered what, exactly, happens when I die or move out, for example, to a care home? I am particularly concerned about what might happen if my property falls in value and it’s left to my children to make up any shortfall.
Also, do I need to add something to my will to arrange for the repayment or will this be organised by the lender?
Answer
The answer to your question firstly depends on your relationship status, as equity release (of which a lifetime mortgage is the most popular option) is only repayable when the last surviving borrower dies or moves into long term care.
Your estate must then repay the final balance to the lender and typically this is through the sale of the property, but your estate could choose to repay the lender from their own funds and take ownership of your home.
Most lenders will provide a grace period of 12 months for the lifetime mortgage to be repaid upon last death or moving into long-term care.
There is nothing for you to put into your will to arrange this as this will discussed with you in detail by your solicitor and the lender when you are arranging your plan. There is also an article on our website which explains the process in more detail.
You can be rest assured that your children won’t have to make up any shortfall, as all lifetime mortgages come with a no negative equity guarantee. This means that should the value of your property fall so that the amount to be repaid is more than its value, then your estate will not be asked to contribute the difference to repay the lender.
The reality is that over time property tends to go up in value and clients are often surprised by how great the value of their estate could be when their plan is repaid. We have a free calculator on our website which shows you the potential value of your estate using different variables.
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Question
Maximum age for equity release?
I hope you can help. I live with my granddad who is 88. I have been paying rent to help him with household bills and other outgoings but I will soon be moving out to start a new job.
We have been looking at him releasing equity to support his finances but is he too old? What’s the maximum age for taking out a plan? Thanks for your help, in advance.
Answer
The good news is that your grandad is not too old to take out equity release. As we have access to the whole of the market, we have lenders that have no upper threshold on age. We have even arranged a lifetime mortgage for a very fit and healthy 100-year-old!
Therefore, the good news is that your grandad would be eligible for equity release based on his age of 88.
At these higher age limits he could borrow approximately 59% of the value of his property.
How can also choose from a wide range of plans with a host of features so that he is able to tailor a plan for his specific needs. You can read all about the different lifetime mortgages that are available here.
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Question
Which lenders should I speak to and who do you recommend?
I have seen some adverts on TV for equity release firms and wondered if you could recommend one or two of the most popular ones, please? Do any of the high street banks offer deals as I would be keen to speak to an organisation I am familiar with first?
Answer
There are two ways that you can take out an equity release plan. By either speaking to a lender directly or by speaking to a broker. This works in exactly the same way as it would when you took out a residential mortgage.
You have the option to speak to a specific lender (such as your bank), or you can approach any number of mortgage brokers. The main difference between the residential mortgage and equity release markets is that with equity release, you must have financial advice to proceed and currently none of the high street banks are equity release lenders.
The equity release industry is governed by the Equity Release Council (ERC) and so you should also be sure that the adviser you choose is a registered member of the Council. You can review the members’ list here.
If you approach an equity release lender directly, then they will obviously only speak to you about their own plans – which may not be the best option for you – and so I would always recommend that you speak to a whole of market, independent advisory service so that you can be sure that your adviser has searched the entire market and found the right deal for you.
This could also save you a lot of money over time, as the interest rates on offer vary considerably from lender to lender.
The two biggest brokers in the UK also advertise on TV. Neither of them are whole of a market brokers as one will only advise on plans from its own lender and the other only advises on five lenders’ plans.
You should also ensure that the financial advice you receive represents good value for money. Of the two brokers just mentioned, one has a fixed advice fee of £599 and the other charges £1,795.
To offer a comparison, Equity Release Supermarket is the UKs largest, independent, whole of market and impartial equity release adviser. As such, we are not tied to any lender and always search the entire market to find the best deal for you.
Our advice fee is guaranteed to never be more that £995 and we know from experience that being a whole of market adviser has enabled us to save our customers money. We’d be delighted to help you and you can find your local adviser here.
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