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Lifetime Mortgage & General Equity Release Advice in Peterborough
Reviewed by Tom Philips
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Equity release Peterborough is a hugely popular way of getting your hands on the equity that has built up in your home so that you can enjoy spending that money however you want to.
The great thing about equity release Peterborough is that you get to remain living in your home. You can also spend the money however you want, whether that is on yourself or others.
An equity release loan is a form of mortgage which allows you to borrow the equity that has built up in your home in exchange for a tax free sum from the lender.
You will never be asked to move house if you opt for an equity release plan, and do not have to repay the loan until after you pass away or move out of that house and into a care home [1].
Your equity release loan in Peterborough will have to be repaid once you pass away and your next of kin sells your house. They will use the sale of the property to pay off the loan, meaning that they will receive less inheritance.
You are able to spend your equity release in Peterborough however you want to. Some people choose to spend that money on themselves, to pay for a new home renovation, once in a lifetime holiday or to help loved ones pay for house deposits or university fees.
Every equity release loan benefits from a no negative equity guarantee. This guarantee ensures that even if your house depreciates in value and sells for less than you bought it for, your next of kin will not be liable to pay off the loan if it does not cover the loan amount [1].
With equity release loans across Peterborough, the interest rates will be higher than with a normal, traditional loan or mortgage.
This means that you will end up paying more interest on your loan. It is also worth remembering that the interest on your equity release loan will grow and turn into compound interest over time.
This means that you could end up paying more if you choose to ignore the interest on your loan [1].
This is why a lot of people choose to pay off the interest on their equity release in Peterborough whilst they are still alive. Not only does this reduce the overall loan amount, but it also increases how much equity you are able to leave your loved ones.
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If you are considering equity release Peterborough, then you need to understand the differences between lifetime mortgages and home reversion plans.
Lifetime mortgages are by far the most popular type of equity release Peterborough and throughout the rest of the UK. Lifetime mortgages allow people aged over 55 years old to release a tax free amount of money from the equity in their home [2].
They are able to do so whilst being able to stay living in their house, and won’t ever be asked to leave. You won’t have to sell your house in order to gain access for funds, which can seem a very daunting prospect for many people.
In order to qualify for a lifetime mortgage in Peterborough, you have to be aged over 55 years old and own a property worth more than £70,000 in the UK. This property also needs to be your main residence, meaning that you cannot live anywhere else [2].
Home reversion plans in Peterborough work a bit differently. In order to qualify for a home reversion plan, you have to sell a piece of your property in order to gain access to your funds. This could be 10% of the value of your property, or as much as 90%.
When your next of kin sells your house after you pass away or move into a care home, the same percentage will be sold back to the back. This means that your loved ones won’t receive as much money in inheritance from the sale of your house.
In addition to this, when you sell a percentage of your property in Peterborough in exchange for your funds, you will be doing so for less than market value.
With both lifetime mortgages and home reversion plans in Peterborough, you do not have to make monthly repayments. However, it is recommended that you pay off the interest in your loan as you go [2].
The Equity Release Council monitors the equity release industry in Peterborough so that all loans are fair and transparent. They also ensure that all interest rates on equity release loans are fixed, and if they are not fixed then they are at least capped at a certain amount.
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Equity release Peterborough is a popular option for anyone who needs access to money but does not want to sell their house in order to do so.
Lots of people do not want to sell their house as they get older. This could be for many reasons, including not wanting to move away from loved ones, not having to deal with the effort of moving house and not wanting to downsize.
However, it is important to remember that taking out an equity release loan is another type of mortgage and loan, for which you will be charged a significant amount of interest.
If you wish to leave inheritance to your next of kin, then you might want to avoid taking out an equity release loan.
It is also important to remember that the amount of equity you are able to release from your home in Peterborough is based on the value of your home.
Therefore, if you think your property has decreased in value since you bought it then equity release might not be for you.
With equity release in Peterborough, there are a number of different ways you can gain access to your funds. The most popular ways of getting your money is through a lump sum plan or a drawdown mortgage.
With a lump sum plan in Peterborough, you get your money all at once. This is a great option if you want to spend your money on any home improvements or a holiday that requires payment in full. However, you will be charged a significant amount of interest by doing so.
The other popular option is through a drawdown plan. This allows you to receive your money in frequent, smaller payments. This is the ideal option if you want to spend your equity release money on your day to day living.
If you live in Peterborough and you can’t decide between the two options, then you might want to consider a mixture of the two. This allows you to receive a large lump sum and then a number of smaller payments as and when you see fit.
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How long your equity release plan takes to process depends on a number of different things including the complexity and size of your equity release loan application.
Most equity release plans take approximately 10 weeks in order to process. Broken down, it takes anywhere between three to four weeks to apply for the loan and for the bank to process the loan.
After that, it takes an additional six weeks for your chosen lawyer to process your contract ready for completion of the loan. However, as discussed above, this very much depends on how complex and large your application is.
One way to speed up the equity release process is to pick a good equity release solicitor and make sure that you keep in constant communication with them throughout your application.
If equity release in Peterborough is not for you, then there are a number of alternatives available to you.
For example, you could always choose to sell your house and downsize properties.
For example, you could sell your house for a comfortable £300,000 and buy a new property worth only £200,000 which means that you would have an additional £100,000 at the end of it.
Whilst this is a great way of gaining access to some additional funds, not everyone wants to or is able to downsize properties in later life.
Alternatively, you can choose to use additional savings as a source of income during later life. This will mean that you won’t have to take out a loan, a mortgage or use a credit card where you will inevitably be charged interest and end up owing more than you originally borrowed [3].
If using your savings isn’t an option for you, then you might want to consider asking friends and family for financial help and support. For example, if your children are able to help you then could they lend you the money for a stake in your property? [3].
You might also be able to apply for some form of benefits if you are in need of cash. This could include pension credit or council tax benefits [3].
If you are in desperate need of financial help and support, then we recommend that you speak to a charity such as Age UK or to your local council who might be able to provide you with some form of support.
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The equity release council were initially launched in 1991. They are an organisation that help to support those considering equity release to ensure that they make a safe and wise investment. They hope to safeguard from any bad investments and act in the interest of all homeowners.
The equity release council works with lenders, rather than against them. They also work with the UK Government to ensure that they are doing all that they can to protect UK homeowners.
Lenders and advisers are able to join as members of the equity release council, which signifies that they abide by the equity release council standards.
If you do join as a member of the ERC (equity release council) then you are agreeing to abide by their rules and standards, which aim to offer borrowers the best protection when it comes to their finances and their equity release loan.
Some of these principles are listed further below.
These are their overarching principles that they must abide by at all times. Further below is a list of the product standards that all equity release council members must abide by.
Equity release council members are only able to stay members and tell their clients that they are a member of the ERC if they meet all of the above standards.
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If you want to try to reduce the overall loan amount, then there are a few things that you can do.
By reducing the overall loan amount, you will not only be reducing the amount of interest you have to pay, but you will also be increasing the amount of inheritance you are able to leave your next of kin and loved ones.
One of the best ways to reduce the overall loan amount is to pay off the interest on the loan. By paying off your interest your interest won’t compound as much as it would if you simply left your interest to grow and compound over the years.
Whilst not all equity release loans allow you to repay some of the interest on your loan whilst you still live, others do. You should always ask your equity release advisor if your loan allows you to do so before taking out the loan.
Interest rates for equity release schemes are higher than they are for normal mortgages.
This is because when you take out an equity release loan you are not forced into making monthly repayments like you are with traditional mortgages and loans where a minimum payment is involved.
This means that the bank and lender has to wait a long time before they get any form of return for lending you the money, as they only get the money back when you pass away or move into a care home.
Interest rates are also higher with equity release schemes because there are a lot more legal protections in place to protect and safeguard you when it comes to equity release in Peterborough.
As this costs the lender more money, they have to pass these charges onto their clients in the form of higher interest rates.
All equity release plans across Peterborough and the rest of the UK involve rolled up interest. This means that the amount of interest will compound, and within your first year your interest will be at its lowest, as you will only be charged on the initial loan amount.
Year on year, if this interest goes unpaid then it will compound and increase your overall loan amount. Subsequently, this increases the amount of interest you will be charged the next year, and so on and so forth.
This means that the younger you are, the more interest you will be charged. The older you are, the less interest you will be charged as you are more likely to pass away before your interest has time to properly compound.
Whilst this might seem daunting, it is important to remember that by the time you pass away, your property is most likely to have increased significantly which will hopefully cover the initial loan amount plus the interest that has compounded over the years.
If you are hoping for an equity release scheme where you do not have to pay any interest, then you will have to opt for a home reversion scheme. This way, you won’t be charged any interest.
However, in order to gain access to your money through a home reversion plan, you will have to sell a portion of your home to the lender for less than market value.
If you are considering equity release in Peterborough but are confused about the interest rates, then speak to the team at Equity Release Warehouse.
Please call our 24-Hour Helpline: 0330 058 1579
Unfortunately, there are a number of myths surrounding equity release in Peterborough and throughout the rest of the UK. These myths confuse people and lead them into thinking that equity release in Peterborough is not for them.
At Equity Release Warehouse, we don’t want anyone to be put off the idea of equity release due to misunderstanding. This is why we have listed some of the most common myths and misconceptions of equity release below.
Whilst many people think that they will have to pay back more than the value of their house by the time the loan comes to an end, however this is simply not the case. This is because there are a number of things in place to ensure this.
One of the best ways the Equity Release Council ensures this is by ensuring that all equity release loans are protected by the no negative equity guarantee.
Unlike with other types of loans and mortgages, you do not have to make any monthly repayments when it comes to equity release.
You can however choose to pay off the interest on your equity release loan through monthly repayments, but this will always remain optional.
If you choose to ignore the interest on your loan and do not make any repayments, then the interest on your loan will only compound over time. This means that when your next of kin come to sell your property they will also have to pay off the interest on the loan as well as the initial loan amount.
Many people think that by taking out any form of equity release on your property then you will no longer own your home. However, this is not true. When you take out a lifetime mortgage, you remain the sole owner of the property. You are only simply borrowing against the property.
However, when individuals opt for a home reversion plan then they do have to sell a percentage of their home in order to get their money.
Home reversion plans are a lot less popular than other types of equity release, because when you come to sell your house your next of kin will only get a certain percentage of the proceeds of the sale.
In order to apply for an equity release loan, you need to have paid off a large portion of your mortgage. If you still have a mortgage, then you will have to use the money you receive from your loan to pay it off.
Many people wrongly believe that equity release means that you are unable to leave inheritance to your loved ones. This isn’t the case. Whilst the amount of inheritance you are able to leave your loved ones will be less, there are things you can do to ensure that you still leave them something.
For example, paying off the interest on your equity release loan will ensure that you are able to leave as much money as you can to your loved ones. You could also try to invest your equity release money where you can, although we always advise that you speak to a financial advisor first before doing so.
You could also choose to gift your equity release money to other people, such as your grandchildren. You could choose to give them a deposit for their first house or pay for their higher education fees.
Please call our 24-Hour Helpline: 0330 058 1579
If you have any more questions about equity release in Peterborough, then make sure that you speak to someone at Equity Release Warehouse. Our team will use our very own equity release calculator to work out exactly how much equity you would be able to release from your home.
[1] https://nationaldebtline.org/fact-sheet-library/equity-release-ew/
[2] https://www.equityreleasewarehouse.com/guides/home-reversion-plan-vs-lifetime-mortgage/
[3] https://www.equityreleasewarehouse.com/help-centre/what-alternatives-equity-release/
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