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Lifetime Mortgages, Home Reversion, and General Equity Release Advice Lancashire.
Reviewed by Tom Philips
Get in touch today on 0330 058 1579 for a free, zero obligation consultation. We can help you locate equity release advisors in your local area.
Equity Release is incredibly overlooked in Lancashire – many people do not see the benefits of releasing equity, or they are afraid of the potential pitfalls.
One study discovered that over-55s in the South of England are three times as likely to take out equity to fund a house purchase as those living in the North (1).
This may be partly due to the high property prices in the South of England – homeowners are more likely to benefit from equity release if they own a valuable property that they can release plenty of funds from.
However, property prices are rising everywhere, so homeowners in Lancashire should not discount equity release as an option if they have a property worth at least £70,000.
Please call our 24-Hour Helpline: 0330 058 1579
It goes without saying that the most common way to afford a home is to take out a traditional mortgage, which has to be paid monthly and may be paid in full if the homeowner has the means to do so.
So, with traditional mortgages dominating the market, why would anyone consider getting an equity release mortgage instead?
Firstly, many people who get a lifetime mortgage in Lancashire have already paid off their traditional mortgage, so equity release is not necessarily an alternative to getting an ordinary mortgage.
Generally, homeowners in Lancashire use equity release to fund their life when they have retired, or will be retiring in the near future. Nowadays, a pension does not necessarily cover the rising costs of living, so pensioners are seeking new ways to boost their income.
With an equity loan, there is absolutely no obligation to pay it back as it is paid when your property is sold when you die or go into care. This means people can make the most of their funds in their later years without worrying about the debt.
If you do have an existing mortgage, the reason you should consider equity release is that, as mentioned above, you would not have the burden of regular payments, so you could live a less stressful life after leaving work.
Please call our 24-Hour Helpline: 0330 058 1579
Home reversions are less popular than lifetime mortgages, and this is partly because many people do not believe it is a good deal. You sell some of your home to an equity release provider and they then give you a lump sum of tax-free cash.
The reason some people dislike this scheme is that the equity release provider purchases a share of your home for less than the market value (around 20-60% of the value), only to later sell it for the full price (2).
This means you are missing out as you are not getting all the money that you could from your property.
However, you must remember that in return, you have tax-free cash to spend on anything you’d like, and you can live in your home without worrying about paying rent.
What’s more, the lower offer of money will not impact you as the house sale will happen when you pass away, so this is only something to be concerned about if you want to pass on inheritance to your family.
If you do not like the idea of interest accruing on a loan, a home reversion may be for you, as you receive the full loan amount in one transaction, meaning you are not paying interest on it for the duration of the scheme.
Sometimes, with a home reversion, it is easier to protect your family’s inheritance funds, as you can save a share of your house for your loved ones. However, it is important to note that this is also possible with certain lifetime mortgages – you just have to select the right one.
There are certain requirements you must meet for lifetime mortgages and home reversions, some of which are non-negotiable and some of which exclude you from certain plans but not others.
In terms of the criteria you absolutely must meet, you must own a home in Lancashire that is worth at least £70,000 and you must be at least 55 years old for a lifetime mortgage and 65 years old for a home reversion.
The minimum age limit for a lifetime mortgage is very strict, so you will not find a plan that accepts you if you are younger than 55 years old. For a home reversion, it is also quite strict, but there is a chance your application could be approved before you turn 65 years old.
There are other factors that will be important for certain mortgage lenders and home reversion providers, but as we have mentioned, these are not acknowledged across the board.
For example, to be enrolled on certain lifetime mortgages, you will need to prove that you are using the loan for a specific purpose (e.g. purchasing a second home), your credit rating must be good, and you will have to agree to paying a fine if you decide to repay the loan early.
If you are concerned about any of these criteria, speak to an unbiased adviser as they will explain these in more detail, and help you to find a scheme that is suited to your needs.
Please call our 24-Hour Helpline: 0330 058 1579
Traditionally, we spend our entire lives working, rely on our pension to get us through retirement, and then leave a sum of money to our beneficiaries when we pass away.
Though many people will not waiver on leaving money to their families, it seems unfair that they may have to suffer through a difficult retirement so that their family inherits money when they die, even though they are living in a high-value property that they could release funds from.
As a result, some over-55s decide to take out equity to help them in their later years, and though this reduces the inheritance, they are still able to leave some money to their loved ones.
Later life lending is also a great idea for people in dire straits, whose pension is not covering their expenses, and who fear that they are not able to make ends meet.
We could not have predicted the rising cost of food, fuel, electricity, and other essentials, so some homeowners have retired and now find themselves in a precarious financial situation,
Equity loans help by relieving the pressure of having to repay money and providing homeowners in Lancashire with a consistent income (monthly payments) or a large sum of cash that they can spend without worrying about repayment.
As with every scheme, there are disadvantages to releasing equity in Lancashire, and we want to make you aware that later-life lending is not ideal for everyone.
If you can find another way to boost your income (we will give you some ideas later on), it may be best to avoid taking out equity as it is better to not leave your family with any debt.
Later life lending is advised for people who do not have the option to find money elsewhere.
If you are hoping to leave a large inheritance to your family, it may be best to avoid equity release. Though it is possible to look after your family with this scheme, it is undoubtedly harder to do so.
If you are releasing equity to combat the cost of living, then it might be better to first try to see if you can better manage your budget. Below, we list organisations that may be able to help in Lancashire:
Address: Blues & Twos Credit Union Ltd Lancashire Police Headquarters, Hutton PR4 5SB
Telephone: 01772 618833
Website: http://www.bluesandtwos.org.uk/
Address: 5 George St, Lancaster LA1 1XQ
Telephone: 01524 481508
Website: http://www.northlancashirecab.org.uk/
Address: 29 Market St, Chorley PR7 2SY
Telephone: 01942 245656
Website: http://www.unifycu.org/
Address: 35-39 Market St, Chorley PR7 2SW
Telephone: 0808 278 7880
Website: https://citizensadvicelancashirewest.org.uk/index.php/chorley-citizens-advice-2/
Address: Unit 47, The Concourse Shopping Centre, Skelmersdale WN8 6LN
Telephone: 0808 278 7880
Website: https://citizensadvicelancashirewest.org.uk/index.php/west-lancashire-citizens-advice-skelmersdale/
Address: 9 St James Square, Bacup OL13 9NH
Telephone: 01706 601809
Website: https://www.findyourcreditunion.co.uk/credit-unions/bacup-lancashire-credit-union-limited/
Please call our 24-Hour Helpline: 0330 058 1579
We want to outline how you could use equity release to help your family with their finances as we do not want to create the impression that it is impossible to take out equity and still help your family out.
Firstly, as we have mentioned, you can protect some of your loved ones’ inheritance with a home reversion, and this is also possible to do with certain lifetime mortgages.
However, this does not provide them with more money than they would have had to begin with – it simply ensures they aren’t left with nothing.
Secondly, you could use your equity loan to gift money to your loved ones while you are still alive, or to purchase something for them. This is easily done with a lump sum lifetime mortgage as you will receive the money all at once.
The money you gift to your loved ones is free from tax for seven years, so this can be a great way to help out your family and friends without facing financial penalties.
Please call our 24-Hour Helpline: 0330 058 1579
You should now be familiar with home reversions and lifetime mortgages. However, there are many types of lifetime mortgage in Lancashire.
We will not explain each one today, as you can head to the plans section of our website for that, but we will list the available arrangements:
Not everyone will be eligible for all of these, so if you are drawn to a particular one, mention it to an equity release adviser and they will investigate whether it would be possible for you to apply to that specific scheme.
Please call our 24-Hour Helpline: 0330 058 1579
It is a common misconception that a retirement mortgage works differently to a lifetime mortgage. With a retirement mortgage, you will go through the exact same process of equity release, but the difference lies in when you receive your loan.
Homeowners who take out retirement mortgages tend to receive their funds just before or during their retirement, so the money comes in when they are no longer receiving income from their job.
As for a retirement interest-only mortgage, anyone looking to release equity should know that you pay back just the interest on the loan to prevent it from adding up over time, but you do not pay back the loan itself.
We would love to give you an exact figure of how much money you could release, but it goes without saying that we need your personal details first, so you would need to head to our quote page to find out how much you could release.
Our free equity release calculator is a great tool for potential customers, as all you need to do is input your property type & value and your age to get a general figure that tells you how high your loan could be.
Please call our 24-Hour Helpline: 0330 058 1579
Equity release providers in Lancashire know that your home will not remain at the same value for the duration of the equity release scheme, so they are well-prepared for alterations in value.
If your home has dropped in value by the time it comes to sell it, the lender will get less money from the sale. Evidently, if it increases in value, they will get more money.
Some families of equity release consumers find themselves in a tricky situation as their loved one’s property has decreased in value and they, therefore, owe more money to the lender, which they may not be able to afford. This is known as negative equity.
However, this is absolutely avoidable. We advise you to find a plan with a ‘no negative equity guarantee’, as this means your family will never have to pay back more than you initially borrowed (including the interest that has accrued).
With a lifetime mortgage, your family will have to inform the mortgage lender of your death or your move into care, and they will begin to arrange to sell the property. This is usually completed within a year.
With a home reversion, again, your family must inform the equity release provider of the change in situation. After this, your family must move everything out of your home and it is generally sold within a few weeks.
Please call our 24-Hour Helpline: 0330 058 1579
With most equity release plans, you can technically back out if you decide it’s no longer working for you, but there may be huge financial penalties.
Some providers require you to pay an early repayment fee of up to 25% of the value of the loan secured against your home, so this is obviously something you want to avoid at all costs.
There are ways you can alter your experience of equity release without backing out completely. For example, you could request a new property, and providers who are affiliated with the Equity Release Council must provide you with a suitable alternative.
Yes, there are other things to consider before settling on equity release, such as: borrowing from your family or a close friend, getting credit cards, or downsizing.
Three other methods we are going to focus on today are re-mortgaging your house, getting grants from the government, and managing your budget.
With this option, you would take out a new mortgage on your property, but it would be a standard mortgage rather than an equity release mortgage.
However, this can be challenging if you have a poor credit history or if your property has decreased in value, as this means lenders are less likely to approve you for a loan (3).
If you are considering re-mortgaging your house, you don’t have to rule out equity release entirely, as you could remortgage your house as a means to release equity.
There are government grants available to people in their later years that can help them to cope financially without having to take out equity.
Some of these grants are intended to help pensioners pay their bills, such as the Winter Fuel Payment. This scheme provides people who were born before the 5th October 1954 with funding between £100-£300 to cover energy bills in the winter (4).
Remember that there is also help available for expenses outside of the home, such as travel. Retirees can benefit from a free bus pass and discounted rail travel, which all adds up when you are trying to make ends meet.
An obvious form of financial aid is means-tested state benefits, so we urge you to check whether you are eligible for any benefits. If you do decide to release equity while you are claiming benefits, know that some schemes will interfere with your entitlement to said benefits.
Finally, there may be things you are spending lots of money on that are not necessarily essential, and you could look at reducing your spending in these areas.
For example, do you have any subscriptions you could cancel? Are you holidaying in expensive areas when you could consider budget-friendly destinations? Are you shopping in an expensive supermarket when there’s a cheaper one down the road?
There are small hacks that can help you with spending. If you love going out to eat and you don’t want to give it up entirely, you could purchase a Tastecard for 2 for 1 meals. If you enjoy going on excursions, you may find that they are cheaper when you go on a weekday.
We want to be careful with these suggestions, as we know financial issues can be much more complicated than this, and it is not always an issue with budgeting that lands you in a challenging situation.
However, do not dismiss budgeting as a way to keep more of your income, as you can get creative with your savings and put yourself in a better position to pay for the essentials such as bills.
Please call our 24-Hour Helpline: 0330 058 1579
As we are so open about the drawbacks of equity release in Lancashire and all over the UK, you may be inclined to believe that taking out equity is not safe.
However, we want to assure you that releasing equity can be incredibly safe if you go about it in a sensible way. Equity release is well-regulated in this country, so the procedure is as safe as possible if your plan is regulated by the Financial Conduct Authority and the Equity Release Council (ERC).
The problems arise when you select a lender or plan that is not regulated, you jump into decisions without carefully considering them, and you do not read through the fine print carefully.
Finding a professional adviser helps to prevent this, as they are there to ensure you have considered all options, and to explain how your prospective equity release plan works in great detail.
Please call our 24-Hour Helpline: 0330 058 1579
If you are still struggling to understand exactly what equity release is and how it works, we don’t blame you, as it isn’t always an easy concept for homeowners to grasp.
Our blog on equity release jargon may help you, as we go into detail about what commonly used terms mean, including loan-to-value ratio, downsizing, and early repayment. Once you understand these terms, it will be easier to figure out the minute details of equity release in Lancashire.
We encourage you to explore our website in general. Though our information relates to equity release everywhere and not just in Lancashire, you will find answers to all the questions you could imagine, from ‘how long does equity release take?’ ‘can I still rent out my home?’
When you get in touch with us, you will be able to benefit from personalised information from an equity release specialist, so our advice will be Lancashire-specific, as well as in line with your personal financial situation.
If you are in need of a consultation very soon, please ring us on 0330 058 1579 and we will talk you through the steps of releasing equity. Alternatively, if you are happy to wait a short period, complete this form and we will contact you as soon as we can.
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[1] South East most popular area for equity release https://professionalparaplanner.co.uk/south-east-most-popular-area-for-equity-release/
[2] Home reversion plans versus lifetime mortgages https://moneyfacts.co.uk/retirement/guides/home-reversion-plans-versus-lifetime-mortgages/
[3] Should you remortgage? Many can slash costs by switching mortgage
[4] Benefits and Grants Available for OAPS in 2022 https://householdquotes.co.uk/benefits-and-grants-for-oaps/
[5] Free bus pass and transport concessions https://www.ageuk.org.uk/information-advice/money-legal/benefits-entitlements/free-bus-pass-and-transport-concessions/
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