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Lifetime Mortgage & General Equity Release Advice in Middlesbrough
Reviewed by Tom Philips
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Equity release Middlesbrough is a type of loan or mortgage that allows individuals to gain access to the money that is built up inside their home, including the deposit you put down when you first bought the house, your monthly mortgage payments minus the interest as well as any added value that comes from an increase in value and price to your property [1].
You gain access to this cash in either one large lump sum or through a number of smaller payments, also known as a drawdown plan. In either situation, you do not need to repay the loan until you sell the house.
This will only be done once you pass away and your next of kin put your property on the market. The proceeds from the sale of your home will then pay off the loan.
Remember, as with any loan, you will be charged interest. As your loan lasts for as long as you live, or until you move into a care home, you are likely to gain a lot of interest over the years.
This interest will compound over the years, turning into compound interest. This means that your interest will be charged interest, and your overall loan amount will increase [1].
Lifetime mortgages are the most popular type of equity release, and are available to anyone aged 55 or over. Home reversion plans are the second most popular type of equity release schemes, and work slightly differently to lifetime mortgages.
With home reversion plans, you do not pay interest on your loan. However, you do have to sell a percentage of your home to the lender in order to gain access to your equity funds [1].
Whilst you will be charged interest when it comes to equity release Middlesbrough, you do not have to pay any tax on your loan amount. Your equity release loan will also benefit from a no negative equity guarantee, which safeguards your family and next of kin.
The no negative equity guarantee ensures that if the proceeds from the sale of your house does not cover the loan amount, then your family or next of kin will not have to pay off the difference. Your lender will always be liable to pay off the difference in any shortcomings [1].
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Equity release Middlesbrough gets paid once you pass away or move into a care home. Once this happens, your children or next of kin will have to sell your home and use the money from the sale of the property to repay the loan.
The sale of the house will almost always repay the loan amount. If it doesn’t, then they will be protected by the no negative equity guarantee.
Of course, if your next of kin decide that they do not want to sell the property and have other means of paying the loan, then they are more than able to pay off the loan using their personal funds, without selling the property [2].
Family members usually have around 6 – 12 months to sell the property and repay the loan, and your lender and adviser will be on hand to help them through the process.
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Repaying an equity release loan early is rare, but not unheard of. Unfortunately, most equity release lenders include an early repayment charge (ERC) which means that you will be charged a certain percentage if you wish to repay your loan back early.
This charge can be substantial and does put a lot of people off repaying their equity release loan.
Some borrowers and homeowners choose to repay their equity release loan early in an attempt to reduce the amount of interest they are charged and the amount of compound interest that occurs.
If you think that you might want to repay your equity release loan early, then you should explain this to your equity release specialist and adviser as soon as possible and as early on in the process as possible.
This is because some lenders will charge you if you want to make an early repayment, whereas others will not.
There are also a number of exemptions that some lenders will be willing to make, which means that you will not be charged an early repayment fee. Some of these exemptions are listed and explained below for you.
Some equity release lenders will allow you to repay your loan back early if you want or have to downsize for whatever reason.
This is usually called downsize protection and most equity release plans should include this in their terms and conditions if they are a member of the Equity Release Council.
Likewise, if one member of the agreement passes away or if you have another significant life event occur, then you might be able to repay your loan early without being charged an early repayment fee.
Some lenders will also allow you to make partial repayments to your loan each year. Usually, you are allowed to repay up to 10% of your total loan amount on an annual basis, should you wish to do so. By doing so, you will drastically reduce the amount of compound interest added onto your loan which will mean that your loved ones might be able to keep some of the money after the house is sold and loan repaid.
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Most people are able to release anywhere between 10% and 90% of the value of their home, although this depends on a few things. For example, your health and age will come into play, as well as what type of equity release loan you have opted for [3].
Your age and health will play a huge factor when it comes to determining how much equity you will be allowed to release from your home.
Equity release in Middlesbrough lasts for as long as you live, or until you move into a care home. For this reason, lenders will want to know how long you are likely to live and will use your age and your current health status to determine this.
During your initial conversations with your lender and equity release specialist, you will have to be honest about your current health status and must declare any long or short-term health conditions.
The value of your property will be assessed during a home valuation report. Your lender will arrange for someone to visit your home to assess how much they think it is worth. They will examine your house both internally and externally and will give an estimate.
Valuers will take a number of things into consideration when carrying out a home valuation, including the condition of your home, whether it suffers from any subsidence, the general area as well as the value of other properties on the same road as your property.
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Finally, equity release lenders will assess whether or not you have any outstanding debts which need to be paid off.
They will carry out a credit check during your application in order to do this. If you suffer from any debt or CCJ’s, then you will need to declare this, as it might hinder your equity release application.
If you still have a traditional mortgage on your property, then you might need to pay off this mortgage before you apply for equity release in Middlesbrough.
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Yes, taking out equity release in Middlesbrough is safe. Jumping into equity release in Middlesbrough without thinking long and hard about it first isn’t recommended, as you should be well aware of the pitfalls of equity release in Middlesbrough before taking out a loan.
Before you apply for equity release in Middlesbrough you should seek the advice of an equity release specialist.
This specialist will improve your understanding of equity release in Middlesbrough and will make sure that you are well aware of the pitfalls and downsides of equity release in Middlesbrough before making a decision.
When taking out equity release in Middlesbrough, there are ways and means of ensuring that your lender and adviser are legitimate and the plan you are taking out is safe.
For example, you should always ensure that your equity release provider is a member of the Equity Release Council (ERC) so that you know they are working to a certain standard.
Your provider should also be regulated by the Financial Conduct Authority, so that you know they are working to high industry standards and are reliable and trustworthy.
The equity release industry has made great improvements over the last decade to become more regulated and reliable, although, like any industry, there are a number of scammers around.
This is why you should always check your adviser and solicitor online first, to see what their reviews are like.
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The equity release conveyancing process usually takes anywhere between 8 – 12 weeks to process. During this time, your solicitor will work on your application with your lender. They will process all of the paperwork for you.
You need to kick off the equity release process by reaching out to an adviser or by talking to the team at Equity Release Warehouse. They will be able to help you to apply for a loan and choose the right solicitor for you.
During the first few weeks, your lender will send someone to your property to carry out a house valuation. This will help your lender to determine how much you think your property is worth.
When the conveyancing process is complete, your lender will transfer the funds to you through your solicitor, who will work as the middleman.
Your loan could come through quicker than 8 – 12 weeks, although this heavily depends on the complexity of your loan, the loan amount and how fast your solicitor and lender are able to work.
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With all lifetime mortgages, you need to be aged at least 55 years or older in order to qualify. If you want to apply for a home revision plan, then you need to be aged at least 65 years or older.
Unfortunately, you are not permitted to apply for equity release in Middlesbrough if you are not aged 55 or over.
It is important to understand that this is for a reason. Your equity release loan will continue for as long as you live, and your interest will compound meaning that for every year your loan continues, you will owe more.
If you were to take out an equity release loan under the age of 55, you would most likely end up owing a substantial amount, which the sale of your home would not cover.
For this reason, you are not able to apply for equity release in Middlesbrough if you are under 55 years old.
However, there are a number of alternatives to taking out equity release in Middlesbrough, which you are able to do under the age of 55 years old.
This includes things such as getting a retirement job, applying for a personal loan or borrowing money from family or friends. There are more alternatives to equity release in Middlesbrough discussed further below in this article.
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The cost of equity release in Middlesbrough is always a concern for those considering taking out an equity release loan.
However, equity release loans usually cost individuals approximately £1,000 – £3,000, depending on the complexity of their loan and estate [4].
This figure usually involves the cost of an equity release solicitor, an equity release specialist and a home valuation which will be completed at the start of your application.
Some lenders and advisers might expect you to pay the costs upfront, whereas others might only expect you to pay them once you have received your equity release money [4].
If you are concerned about the cost of an equity release specialist or loan, then talk to a member of the team at Equity Release Warehouse.
Our specialists won’t charge you for any initial advice or support, and won’t put any pressure on you to go ahead and apply for an equity release loan, either.
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When it comes to equity release in Middlesbrough, all interest rates are fixed. This means that your interest rate won’t fluctuate every few years as they do with traditional mortgages.
Instead, you will be able to see exactly how much you are going to pay during the entire duration of your loan, as the interest rate will never change.
It is important to understand that your interest will snowball and turn into compound interest over the years, meaning that your overall loan amount will increase for every month and year that your loan continues.
At Equity Release Warehouse, we are passionate about all things equity release in Middlesbrough.
However, we are also well aware that there are numerous risks and downsides to equity release in Middlesbrough, which are important to understand and acknowledge if you are considering taking out a loan.
Below is a list of some of these risks and disadvantages for you to consider:
Compound interest is one of the biggest downsides to equity release in Middlesbrough. This means that your overall loan amount will be increased, meaning that by the time your equity release loan comes to an end, you will end up owing a substantial amount.
Compound interest is essentially interest on your interest, which means that your debt and loan amount will quickly snowball. By the time you pass away and your loan comes to an end, the property needs to be sold to pay off the loan amount.
Unfortunately, equity release in Middlesbrough and throughout the rest of the UK will have a significant impact on your eligibility for any means-tested benefits.
Even if you are not claiming any means-tested benefits at the time of the loan application, you must consider whether you are going to do so in the future.
Taking out equity release in Middlesbrough will have an impact on council tax benefits, pension credit and any savings credit you might be receiving.
Your benefits might get reduced, or they might be cut off altogether. If you are currently claiming any of these benefits, then you need to think long and hard about whether taking out an equity release loan is for you, or if it’s going to be more of a hindrance than a help.
As previously discussed, repaying part of your loan early will incur early repayment fees.
This means that if you want to repay your full loan amount early, repay part of your loan early or exit your plan altogether, then you will be charged a percentage of your overall loan amount for doing so, which could be a significant amount.
Finally, taking out a lifetime mortgage or home reversion plan will mean that the proceeds from the sale of your home pay off the loan, instead of going to your loved ones as inheritance.
If you are considering taking out an equity release loan, then you should think carefully about this and speak to your family and next of kin(s) to make sure that they are well aware of your plans and its implications on your inheritance.
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Yes, you can be refused an equity release loan. Not everyone is approved for a loan, as there are a number of qualification criteria.
Each lender’s qualification criteria is different, so you must not presume that because you qualify for one lender you qualify for all lenders.
For lifetime mortgages, you must be aged 55 or over, own your own property in the UK worth at least £70,000 and be built out of traditional materials.
You also need to have paid off the majority of your traditional mortgage, and have cleared off any other debt, including any personal loans or debt you might have.
Remember, your equity release provider will carry out a credit check, so it is important to be open and honest about any debt you might be suffering from so that your adviser and lender do not waste any time on your application for you to be rejected.
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During your equity release application, you will be handed a redemption statement from your lender. Your redemption statement will show exactly how much money is left on your loan.
You will also be able to see how much you have already paid off, including the amount of interest you have paid off and how much interest is left to be paid [5].
For those of you who still have a traditional mortgage by the time you come to apply for an equity release loan, your lender will need to provide you with a redemption statement from your traditional mortgage, so that your new lender knows exactly how much is left you have to owe on your initial mortgage.
You will then be expected to pay this amount off once you receive your equity release funds [5].
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If you are considering taking out equity release in Middlesbrough, then the Equity Release Council recommends that you put a lasting power of attorney in place.
A power of attorney acts on your behalf when you no longer have the capacity to make decisions about your life, your finances and your health.
This person is usually a family member, or someone you trust and will trust for the rest of your life.
Having a lasting power of attorney in place is incredibly important when it comes to equity release in Middlesbrough because your equity release loan will last for as long as you live, or move into a care home.
Therefore, the chances are that your lasting power of attorney will have to make some decisions for you whilst your equity release loan is still active.
If you are considering having a lasting power of attorney in place, then it is important to consult with your solicitor to get this agreement set up as soon as possible.
You must also seek advice from a professional financial advisor specialising in equity release. They will inform you of the pros and cons of having a lasting power of attorney in place.
There are some important risks to consider when it comes to having a lasting power of attorney in place when taking out equity release in Middlesbrough, including the impact this might have on your next of kin(s) and inheritance.
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Negative equity is a homeowner’s nightmare. Essentially, negative equity is when your house decreases in value so much that it is now worth less than the mortgage left on the property.
People usually fall into negative equity when the housing market crashes or when houses are selling for particularly cheap for whatever reason [6].
Let’s use an example. If you bought a property for £150,000 with a mortgage of £120,000 and the property decreases in value by £50,000, the property is now worth only £100,000.
This means that you would now be in negative equity. Unfortunately, there are around half a million properties across the UK that are in negative equity.
Negative equity becomes a huge problem if you want to sell your property and buy another property. This is because most people rely on the equity in their home to pay for the deposit on a new property.
Without this and with no savings, you would find it incredibly difficult to buy a new house [6].
You have essentially lost your deposit and your equity that has been kept safe until now inside your home. In fact, most lenders across the UK simply will not allow you to apply for a new mortgage if you are currently in negative equity.
When it comes to equity release, the major fear most people have is that their house will decrease in value, and the proceeds from the sale of the house will not cover the loan amount once you pass away or move into a care home. Many people worry that this means that their loved ones and next of kin(s) will be liable to pay the difference.
However, all equity release loans in Middlesbrough and the rest of the UK benefit from a no negative equity guarantee.
This guarantee ensures that if your house decreases in value and falls into negative equity, your lender will pay the remaining amount and not your loved ones or next of kin(s).
If you are worried about falling into negative equity, then the best thing that you can do is to speak to a financial adviser about what your options are and how you might be able to avoid staying in negative equity.
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If you want to apply for equity release in Middlesbrough then you will need to employ and engage a solicitor to act on your behalf. This solicitor will manage your contracts and paperwork and will act as the middleman between you and your lender.
When it comes to the legal aspects of equity release in Middlesbrough, equity release is a specialised area of conveyancing, meaning that your solicitor will need to be well-experienced in dealing with equity release loans and must understand all aspects of equity release before taking on your case.
Your solicitor will draft up your paperwork and ensure that everything is above board.
They will also explain parts of the terms and conditions to you, such as any early repayment fees, your no negative equity guarantee as well as what happens when you pass away or move into a care home.
When choosing an equity release solicitor, make sure that your solicitor works for a large firm, that they have already processed equity release loans in the past and that they have good reviews, either from people you know or from reviews online.
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There are lots of different equity release lenders to choose from.
During the initial stages of your equity release application, your equity release adviser and specialist will look at all of the different lenders listed below and will advise you and which ones are best suited to you and your specific circumstances:
It is important to remember that every lender has their own qualification criteria.
So, do not presume that just because you qualify for one lender, you will qualify for the rest.
Some lenders have age restrictions, whilst others are better and more relaxed when it comes to lending to those who are still paying off their traditional, pre-existing mortgage.
If you think that you will want to pay off parts of your equity release loan early, through early repayments, then you will need to choose an equity release lender who will not charge you early repayment fees, which might limit how many lenders you are able to choose from.
Depending on your specific circumstances, it is likely that your equity release specialist and adviser will suggest a couple of lenders to choose from, all with their different pros and cons.
They will talk through each lender at length with you, and then allow you time to think about which lender and plan you think is best suited to you.
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The equity release industry has grown significantly over the past couple of decades, and that is largely due to the increased regulation throughout the industry.
Regulators such as the Financial Conduct Authority and the Solicitors Regulation Authority are able to help regulate the industry as well as raise standards and quality within the industry.
They are also able to help identify and avoid scammers within the industry [7].
There are numerous regulators within the industry, including the Financial Conduct Authority and the Financial Ombudsman Service. Likewise, The Equity Release Council has done great work to improve standards and values within the industry.
The Financial Ombudsman Service regulates everything within the financial industry and will also deal with any complaints made about lenders or financial companies.
The Financial Ombudsman Service does not charge you a penny for their work, and once you make an initial complaint to them, they will then work to find you the support and any compensation you might be due.
The Solicitors Regulation Authority regulates the legal industry. They encourage all legal firms and solicitors to join the authority and are able to help any clients with any complaints they might have about a legal firm or specific solicitor.
The Solicitors Regulation Authority is able to help you to get any compensation you might be due from inadequate standards within the industry.
They also provide the public with scam alerts to try and save the public from falling victim to scammers.
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The Scottish Legal Complaints Commission works on behalf of the public in Scotland and will handle any complaints that you might have about any solicitors or legal firms in Scotland.
They work entirely independently of any solicitors or companies and won’t charge you a penny for their work.
The Financial Vulnerability Taskforce are trying to regulate and improve the industry by improving practices and standards with the industry.
They work across the entire financial industry, but are doing similar work to that of the Equity Release Council.
If you work within the financial industry, then your company might want to join the Financial Vulnerability Taskforce, which will support industry professionals and help them to improve their practices and standards.
The Law Society of Scotland is also on hand to support solicitors. As a solicitor, you can join the Law Society of Scotland which will support and safeguard you as a professional.
HM Land Registry works to safeguard the ownership of land and property across the UK. In fact, they now have over 88% of all property and land across the UK on their books.
If you buy or sell a property or piece of land within England or Wales, then you will need to register your land with HM Land Registry.
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Yes, you are allowed to release equity on an interest-only mortgage. However, you must use the money that you receive from your equity release loan to repay your interest-only mortgage.
An interest-only mortgage is a type of mortgage where you only repay the interest on your loan each month, instead of paying off your actual loan amount.
With interest-only mortgages, your interest rate will be fixed for a few years at a time, usually for 3 or 5 years at a time. By only paying off the interest on your mortgage each month, your monthly payments will be kept down to a minimum each month.
However, with interest-only mortgages, when your mortgage term comes to an end (after usually 25 – 35 years) you will be expected to pay off the initial mortgage amount.
After all, you have only been paying off the interest on the loan after all these years and not the initial loan amount. You will have to pay this off in one large lump sum, which most people tend to pay off by selling their property.
If you want to apply for an interest-only mortgage, then you will have to provide your lender with proof that you will be able to pay off the final lump sum by the time your mortgage comes to an end.
This could be evidence that you already have this lump sum in your savings account or that you will be receiving a substantial amount of inheritance at this time.
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If equity release in Middlesbrough does not fit your needs, then there are a number of alternatives available to you.
Equity release in Middlesbrough has numerous benefits, although it does also have a number of risks and restrictions as well, meaning that not everyone be in a position to release equity from their home,
For example, you are unable to release equity from your home unless you are aged 55 or over, own a property in the UK worth at least £70,000 or have paid off the majority of your original, pre-existing mortgage.
Below is a list of just some of the best alternatives to equity release:
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If you are considering taking out an equity release loan, then you are probably in need of some extra cash.
However, taking out an equity release loan is an expensive and costly way of getting your hands on some extra money. Budget planning before you look at releasing equity from your home is by far the best option.
Whilst most retirees might not believe that they have to budget, it can really help when it comes to managing your finances and pension income:
If you are aged 55 or over and are unable to release equity from your home but are in need of some cash, try the above tips and tricks on how to budget before you try anything more drastic.
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[1] https://www.halifax.co.uk/mortgages/equity-release-mortgages.html
[2] https://www.lloydsbank.com/mortgages/equity-release-mortgages/how-does-equity-release-work.html
[3] https://www.hsbc.co.uk/mortgages/what-is-home-equity/
[5] https://forums.moneysavingexpert.com/discussion/6338065/mortgage-redemption-statement
[6] https://nationaldebtline.org/fact-sheet-library/negative-equity-ew/
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