Equity release is a special type of loan using the main residential property as security. Unlike conventional mortgages, there is no requirement to make monthly repayments and equity release plans do not have a fixed term.
The most popular type of equity release is a lifetime mortgage. The client’s retain full ownership of their property and the interest on the loan can be paid each month or rolled up.
The outstanding loan and any rolled up interest is repaid after their death or if they sell the property and move to another home, e.g. for long term care.
There is normally a drawdown option where cash can be taken in a series of lump sums rather than all at once. Client’s may get a higher loan to equity ratio if they have reduced life expectancy.
Although it may be tempting to get some extra cash, it is important that client’s don’t take equity release too early in their retirement. The average age for equity release is 67 and anyone taking equity release in early retirment must watch out for the effect of compound interest on the rolled up interest.
This is a specialised area of financial services, and expert financial advice should always be taken before taking out equity release.
If you need help or advice on equity release please speak to Simon Whitehead on 01604 521356