Equity release can be a great option for homeowners 55+ looking to improve their financial well-being. This is a financial product that allows you to free up some of the value tied up in your home, which can then be used how you wish whether this is renovating the home, travelling, helping your kids or simply improving your quality of life. A lifetime mortgage is the most common option which allows you to retain full ownership and repayments do not start until you pass away or enter long-term care.
This article will look at the main criteria for a lifetime mortgage so you can see if it is an option for you.
Age & Property Value
To qualify for a lifetime mortgage, you will need to be at least 55. You can qualify at this age, but the number of plans available will be limited as most are available to those between 60 and 85 (there is no upper age limit). The value of your property can also affect the amount that you can borrow and there are also minimum property values to qualify).
What is “No Negative Equity Guarantee”?
It is also important to be aware that there is no negative equity guarantee with a lifetime mortgage to meet the Equity Release Council standards. This is important because it means that you nor your loved ones will ever own more than the property is worth when it is sold. If the property falls in value, for example, and the funds from the sale will not cover the total outstanding figure, the lender would only be able to request the amount that the property was sold for. This means that there will not be additional debt for your beneficiaries to handle after your passing.
It is important to consider your beneficiaries when it comes to equity release, which is why you should always speak to an expert. They will be able to advise on if this is the right product for you, guide you through the process and help you to work out how much cash you could release from your home.
How Do Interest Rates Affect Lifetime Mortgages?
Of course, interest is an important consideration with any kind of financial product (especially in the current climate). Interest is compounded on top of your loan amount and will build over time, so it is important to compare your options. Rates have risen recently as with all interest rates and rates can vary based on your age, property value, the amount that you want to release and the loan-to-value ratio.
You do not have to make any repayments towards your plan in your lifetime and the interest will roll up over time until the last homeowner passes away or moves into care. The sale of the home is then used to cover the total amount. If you can afford to do so, it is recommended that you pay some or all of the interest to keep the final repayment amount down.
A lifetime mortgage can be a smart way for a property owner to boost their finances, but there is also a lot to consider and you should always speak with an equity release expert to determine if it is the right option for you.