Equity Release is all about staying in the home you love, while also being able to use some of the money tied up in its value.
You may also – should you wish – invest savings or a windfall into a property, and then draw down that money using Equity Release. So, in effect you really do get to have your cake and eat it, too!
Equity Release is usually only available against a property that you live in. And, assuming that your home meets the criteria set down by an Equity Release provider (not every property does), you will be able to borrow up to 25% of its value from the age of 55.
The older you are, the higher the amount you can borrow – up to a maximum of just over 50%.
Here are a few points worth considering:
- Using your cash or savings to buy a more valuable home than the one you currently own could enable you to borrow a larger sum as Equity Release.
- If, conversely, you choose to stay where you are and invest your spare money in a separate property (eg a Buy To Let), you will normally only be able to borrow against the one in which you live.
- Equity Release is available against Buy to Let properties – however only one lender currently offers this option.
- By putting your money into one property in which you will live, you also have the option of using Equity Release to buy a second property.
- Your lender does not have a say in how you spend your Equity Release. If you choose to use it to buy a second property, you will be investing it for growth and also have the option of taking a rental income from that investment.
- When considering Equity Release, think about how long you expect to live in the property that you are borrowing against.
- There’s a reason that these loans are often called Lifetime Mortgages: you are generally expected to stay in the same property for the rest of your life, or until you have to move into long-term residential care.
- Repaying your loan prematurely is always possible – but there are usually redemption penalties in the early years.
- Moving house and taking your Equity Release loan with you is usually an option, providing the new property also meets your lender’s criteria.
- Equity Release offers many options to boost your finances and it is an easy loan to secure – but you must go through a fully qualified adviser. There are certain protections in place to ensure that everyone who takes Equity Release does so fully understanding the process.
- Expect the application process to take 10 to 12 weeks and to include sessions with your Equity Release adviser as well as a survey of your property and a meeting with a solicitor who specialises in the area.
The bottom line
You can have your cake and eat it too – but the process of borrowing against your home takes time and careful consideration, and rightly so. In my experience, it typically takes a new client a while to get their head around the idea of Equity Release before they’re ready to put in an application – particularly if they are deciding between paying the interest or letting it accrue. After all, most if us have been brought up to pay back our debts quickly!
If you would like to discuss your options in more detail, do get in touch.
