FREEPHONE 0330 058 1579
7 Days a Week 08:00 - 20:00
7 Days a Week 08:00 - 20:00
Freephone: 0330 058 1579
Lots of people across the UK are considering releasing equity from their home. There are many benefits to equity release, the main being that you are able to spend your equity release funds in whichever way you want to.
However, lots of people wonder, ‘how does equity release get repaid?’
The answer is that how you repay your loan will depend on a number of different factors, including what scheme you opt for and how much equity you have released from your home.
Whilst some people opt to spend their funds on themselves, a holiday or home improvements, others choose to spend their equity release funds on their family or friends for a down payment on a house or to help them during tricky financial times.
Please call our 24-Hour Helpline: 0330 058 1579
If you own your own property in the UK, and are aged 55 or over then you might be considered for equity release. The equity that is within your home includes your monthly mortgage repayments, your initial deposit and the total market value price of your home.
Equity release is a signed agreement that allows individuals to access the money within your home, and you are able to receive this money as either one large lump sum, or a number of different, smaller payments over a series of months.
If you are considering equity release, then you need to speak with an equity release advisor for advice and support on how to go about gaining access to your equity within your home.
Please call our 24-Hour Helpline: 0330 058 1579
Lifetime mortgages are by far the most common form of equity release across the UK. A lifetime mortgage allows you to release equity by taking out a loan against the value of your home.
You do not have to make any repayments on a monthly basis, and will only have to repay back the loan when you pass away or move into long term care [1,2].
The interest on the loan will be added to the overall debt, or you can opt to pay this off whilst you are still alive. However, it is important to understand that this interest will quickly compound, turning into compound interest.
It is important to pick the right equity release lender when picking an equity release lifetime mortgage. The Equity Release Council will ensure that all lenders follow certain rules to help protect you [1].
For example, the Equity Release Council will allow you to continue living in your home, and you will be able to do so until you pass away or move into long term care.
The Equity Release Council will also ensure that you are not tied to monthly repayments, and will also help you to lock in interest rates so that these do not go up and down throughout the duration of your plan and scheme [1].
It is important to understand that your equity release scheme will also benefit from a guarantee towards negative equity, which means that you will never have to repay more than the value of your home.
Please call our 24-Hour Helpline: 0330 058 1579
You are able to release your money as one lump sum, meaning that you get your money all at once. This is a particularly good option if you want to spend your money on something big, such as any home improvements, a holiday or a house deposit for a Grandchild.
Your lump sum will be tax free, meaning that the amount is entirely yours to spend. You are able to opt to repay any interest on the loan on a monthly basis, to stop the interest from compounding over the years.
You are able to opt for a lifetime mortgage even if your property is leasehold, and should you ever choose to sell your home and buy a new property, you are able to transfer your equity release scheme and take it with you.
A form of lifetime mortgage is known as a drawdown mortgage. This allows you to access your money in monthly instalments, rather than one large lump sum.
This might be better for individuals who simply want to increase their inheritance allowance each month, or are struggling from debt and simply want to pay off their debts month by month.
A huge benefit of a drawdown lifetime mortgage is that it will mean that you do not go over any means-tested benefit limits, meaning that you are still able to claim benefits if you opt for this type of plan.
Please call our 24-Hour Helpline: 0330 058 1579
Home reversion plans are another form of equity release. This type of plan allows you to sell part of your house in return for the equity within your house. Again, you are able to receive this money in either a lump sum or through regular monthly payments.
You are then able to remain living in your home for as long as you want, without having to pay any rent or fees.
However, when you come to sell your property when you move into care or pass away, the lender will sell your home and will receive the proceeds they are due for whatever percentage of the property they own.
Please call our 24-Hour Helpline: 0330 058 1579
As discussed above, there are lots of different types of equity release plans, and which equity release plan you opt for will impact how you have to repay the loan once you pass away or move into long term care.
It is important to understand that when it comes to equity release, you not only have to repay the total loan eventually, but you will also have to repay any interest that has been added to the loan over the years.
When it comes to lifetime mortgages, you will have to repay the total amount owed if you pass away or sell your home to move into long term care for health reasons.
When this does happen, the equity release provider (often a bank) will be notified by your solicitor or family that you have passed away or are no longer living in that property due to health reasons.
It is important that your next of kin and any remaining members of interest are informed and included in this process.
The first thing that they will need to do is find out how much money needs to be repaid. You can do this by requesting a redemption statement from the lender. This statement will clearly state how much money was lent in the first place, and how much is now left to repay.
Please call our 24-Hour Helpline: 0330 058 1579
Once this has been agreed on, the lender and provider will then give the family and next of kin approximately 12 months from the end of the equity release loan to repay any money that is owed.
If this does not happen, then they will take out help to sell the property to gain access to the funds that they are owed.
It is important to understand that anyone who lives in the property will need to move out by this stage.
It is important that your equity release plan is protected by any negative equity. This means that you or your next of kin will not have to repay more than the value of your home.
Most lenders ensure that this is in place, otherwise they might be pulled up by the Equity Release Council.
Please call our 24-Hour Helpline: 0330 058 1579
When it comes to a home reversion plan, you will not be charged any interest. However, when you come to sell your home, the money that you get will be given to the lender.
Whilst some home reversion plans are for the total value of the property, some are only for 10% – 80% of the total value of the property.
Depending on what type of home reversion plan you opt for, you might need to pay some form of rent on the property, depending on how much of the property the lender now owns.
If you opt for a shared mortgage, then you will not have to repay anything until after you die. However, shared mortgages were only offered to people during the years of 1996 and 1998, meaning that only a few people got them.
With a shared mortgage, you were only allowed to borrow a maximum amount, and these were more expensive than usual mortgages.
Just like with a home reversion plan, the loan will need to be returned and repaid after you die and your next of kin and family repay your loan by selling the house.
Please call our 24-Hour Helpline: 0330 058 1579
Whilst all equity release plans are usually repaid when someone dies or moves into long term care, some people do choose to pay back their equity release loan early.
It is important to understand that individuals are able to pay back their equity release loan whenever they want. However, depending on what equity release scheme you opt for, you might have to pay a penalty, which are usually called early repayment charges (ERC).
Most equity release lenders charge early repayment fees, but they do vary between each plan. It is incredibly important to ask your equity release advisor if there are any early repayment charges (ERC’s) on your chosen equity release plan, so that you know whether or not you are likely to repay any of your equity release loan early.
When it comes to the best and most flexible equity release loans, lifetime mortgages offer the most flexibility when it comes to early repayment. There are even some charge exemptions across different lenders for lifetime equity release mortgages.
Below are some different types of repayment strategies, reasons and plans that people use throughout equity release plans.
Please call our 24-Hour Helpline: 0330 058 1579
Often, people who have entered an equity release scheme with another person tend to use this option.
If you experience a significant life event, such as the death of the second borrower, then you might be able to pay back the loan on the basis that the other person has now passed away or moved into long-term care for health reasons.
If this is the case, then you might not be charged any early repayment charges.
Please call our 24-Hour Helpline: 0330 058 1579
Depending on what equity release plan you have opted for, you might be able to repay your equity release plan without having to pay a fine if you plan on downsizing your home.
Whilst not everyone will be able to opt for this, it is important to understand that your new lender and mortgage provider will need to accept the equity release scheme and lending criteria.
Some equity release plans across the UK do allow you to repay your loan early, on the basis that you repay a small amount, usually less than 10% throughout the year.
Different lenders will allow you to repay different amounts without charging you, but this will be based on the size of your equity release loan and most will only allow you to do this after a year into your equity release plan.
Please call our 24-Hour Helpline: 0330 058 1579
Most equity release plans allow you to borrow anywhere between 20% and 60% of the total value of your property when you opt for a lifetime mortgage. When you opt for a home reversion scheme, you will borrow between 80% and 100% of the total value of the property.
It is important to understand that how much equity you can borrow will be based on a number of different factors, including how much of your mortgage you have already paid off, and how much you have left to pay.
Please call our 24-Hour Helpline: 0330 058 1579
When it comes to how much you are able to release from your home, there is a limit which depends on a number of different factors.
For example, your health, age, property value and the condition of your home will all determine just how much equity you are able to release from your home.
Any outstanding debts will also influence how much money you are able to release from your home.
When it comes to how much money you are able to release from your home, your age and current state of health will be a major factor.
For example, in order to qualify for a lifetime mortgage, you will need to be aged 55 or over, and if you opt for a home reversion plan, then you will need to be aged 65 or over to be considered.
This is mainly because the younger you are, the longer it will take the lender to recover their investment, which they would ideally like to do, from their point of view, quickly.
How old you are will determine how much you can borrow. For example, if you are aged 55 then you might only be able to release up to 30% of your home’s value.
If you are well into your 70s and 80s, then you might be able to release as much as 70% of your property value.
Your health also has a large part of play when it comes to whether or not you qualify for equity release in the UK.
You will be asked a series of questions about your health by your equity release advisor, and you will have to be entirely honest about your current health and any health issues that you might be suffering from.
Please call our 24-Hour Helpline: 0330 058 1579
The value of your property and home will also be assessed when you enquire about equity release. The lender and advisor will send a property valuer to the house so that they can make a fair and honest evaluation to assess how much the property is worth and would sell for on the property market.
However, the condition will also be taken into account, and the valuer will look out for any potential subsidence, any wear and tear or any other structural issues within the property.
Whether you suffer from any outstanding debts will also impact whether you are eligible to release equity from your home. It is incredibly important that you are open and honest with your equity release advisor when you first enquire.
You must tell them about any outstanding debts, any CCJs or any credit card loans you might have.
The lender will also check to see if you have any debts, before they allow you access to your funds. This is why is it important to be honest and open from the outset.
If you do suffer from any outstanding debt, then you might need to pay off a large amount of these debts in order to qualify.
If this is you, then you should speak with an equity release advisor as soon as possible for advice and support on what to do, and whether you are likely to qualify in the future for equity release, even if you do pay off your debts.
Please call our 24-Hour Helpline: 0330 058 1579
Lots of people who are considering equity release might be wondering how long the process takes, from start to finish.
Although the process might be long and drawn out for some, every step is necessary and warranted. There are a number of steps that are put into place to protect you and your finances. So, whilst some parts of the process might feel slow and unnecessary, remember that they are there to protect you.
The first thing you should do if you are considering releasing equity from your house is to seek help from professional equity release advisors.
You will have two, in-depth sessions with our equity release advisors before you are expected to make a decision or application. Each meeting will take a number of hours, and the specialist advisor will ask you a series of questions about your financial situation.
Equity Release Warehouse consists of a team of fully trained and professional equity release advisors who will be able to guide you through the process from start to finish.
Please call our 24-Hour Helpline: 0330 058 1579
After the initial meetings, if you feel like equity release is for you, then you will need to complete an equity release application form which will be sent to you via the advisor for you to sign.
You will have to fill out this form carefully, making sure that you are filling the information out clearly and concisely.
As well as the form, you will need to send them your proof of identity and proof of address.
Your equity release advisor will also help you to submit your application to the lender. Each lender has different ways to apply, with some asking you to email your application form and others asking you to send it in the post.
Next, someone will come to value your home, to assess what it is worth. They will most likely need to visit your home in order to do so, and will assess the current state of your home as well as other factors such as the location and general area.
Once this is complete, the valuer will then send a valuation report to both you and the lender, so that you know exactly how much your property is worth.
Please call our 24-Hour Helpline: 0330 058 1579
Once your valuation is complete, you will be sent your official mortgage offer from the lender. This will need to be signed by an underwriter, hired by the lender.
At this point you would have already engaged a solicitor to help you with getting your equity release plan up and running. You should always seek legal advice before signing the contract, and your lawyer will be able to advise you on any issues they might notice.
Once all of this has been done, you will be able to complete your equity release mortgage. Your solicitor will be able to send you your funds through the bank, and you will even be able to receive your funds either the very same day, or within a day or two.
Once the funds are released into your account, you are free to spend the funds in whichever way you want. Some people choose to treat themselves, whereas others spend the funds on home improvement or on helping their children and grandchildren buy a house or pay or University fees.
However, if you opt for smaller, monthly payments then you will continue to receive these smaller payments until you pass away, move home or move into long-term care.
Please call our 24-Hour Helpline: 0330 058 1579
Lots of people who want to repay their loan early might be wondering how they can find out how much they will be charged for doing so.
The easiest and quickest way to do this is by checking your equity release contract, or by checking with your solicitor or lender. Once you have this information, you should be able to calculate how much you would be charged if you were to repay a certain amount of your loan early.
Alternatively, your equity release advisor will be able to use their equity release calculator to work this out for you.
Please call our 24-Hour Helpline: 0330 058 1579
If you are considering releasing equity from your home, then you might be wondering, ‘how does equity release get repaid?’
Hopefully, this page has helped you to understand how equity release gets repaid, and how equity release works in general.
If you would like more information on how equity release gets repaid, or what the benefits of repaying your loan early are, then speak to a member of the Equity Release Warehouse team on 0330 058 1579 or by contacting us online to request a callback.
[1] https://www.equityreleasecouncil.com/what-is-equity-release/
[2] https://www.actuaries.org.uk/system/files/documents/pdf/lifetime-mortgages.pdf
To Provide Friendly, Efficient Advice For The Life Of Your Mortgage.
Use our Equity Release Calculator to find out how much cash you can release
CALCULATE NOWWe are hear to answer all of your equity release FAQs. Clear any confusion with this list of commonly asked questions and their answers.
Learn MoreThere are two kinds of equity release plan, and these are lifetime mortgages and home reversion.
Learn MoreUse the equity release calculator below to discover how much money you could release from your home.
Learn More
