Equity Release

Equity release mortgages are designed for those that are 55-plus. They’re designed for later-life lending, and they are used for many, many different reasons, such as gifting money to your children or your grandchildren, or paying your interest-only mortgage, or it may be used just to enhance your lifestyle.

Many of the older clients that we have are on state pension and they can find it challenging year-on-year, month-on-month, so they would take equity from the property and, as I say, they can either have it as a lump sum into their bank account or they can have something called a reserve facility, whereby they can take from it if and when they need it.

Many equity releases are used to repay interest-only mortgages. So, let’s just say you borrowed £300,000 over a 25-year term. After the 25-year term, you still owe that £300,000 and therefore you need to repay it – the lender wants their money back – so you have two options: either you sell the house and you downsize and pay back the lender or, a lot of older people don’t want to move home, they’ve been in there for many years, so they’re taking equity release for £300,000 – if they can, of course. They would repay the interest-only mortgage lender and then, therefore, they stay in their property as they don’t need to service the equity release.

The interest can be higher, in the sense that with an equity-release mortgage you’re probably looking at six or seven per cent, however, it can still be a cheaper option than renting. A lot of older people don’t have the means to rent and neither do they want to – they don’t want to move out of their property. With equity release, you still own the property – the ownership is still yours – albeit you have to pay back the equity release lender on death or if you go into long-term care. Also, if it’s joint – so if there’s a couple – it’s based on the last remaining client. So, if one person was to move into longer-term care – the wife, for example  – the husband could still stay in the property and maintain the equity release. He’s not going to be forced out or forced to pay the equity release. It’s based on the last remaining client.

It’s worth also noting that the beneficiaries of the estate can be affected because their inheritance could be impacted, but, again, it depends on the property value and the size of the equity release as to whether they’re going to be affected or not.

If you are interested in releasing equity from your property or you would like to know more about how equity release works, please get in touch with Vintage Wealth Management today and our specialist advisers can talk you through all the considerations as well as the options available to you.

Paul Grieves
Mortgage Facilitator

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