What is the maximum I can borrow?
How Much Can I Borrow on an Equity Release Plan? Presumably I can only release a certain percentage based on interest rates etc. I currently own a house with my wife which is valued at £ 550,000. I am 65 years old and my wife 66 years old.
The maximum you can borrow through equity release simply depends on the age of the youngest borrower and the value of your property. It is not tied in any way to the interest rate payable on the plan, but rather is determined by age. Simply put, the older you are, the more you can borrow.
For example, at age 55, you could borrow up to 28.5% of the value of your home. By the time you hit 80 this has increased to 55%.
Since you are 65, you can borrow a maximum of 40% of the value of your house, or £ 220,000. If you have pre-existing health issues, you can borrow up to 54.4%, or £ 299,200.
Another factor to consider is that the higher the loan-to-value ratio you borrow, the higher the interest rates will go. Therefore, our advice would be to only take what is essential, as you can still consider a lifetime mortgage with withdrawal – which would allow you to take other amounts in the future.
What is a life mortgage?
I looked for a way to use the wealth in my home to help my son and daughter access homeownership. I was wondering if I could remortgage my property, but a friend suggested I might qualify for a mortgage for life.
Can you explain what it is and how we might go about removing one?
A lifetime mortgage is the most popular type of equity release plan and the three main eligibility criteria are that the youngest owner is over 55, that the property is worth at least £ 70,000 and that it is located in the UK. I’m assuming you “tick” all of those boxes.
The amount you can borrow with a life mortgage is then determined by your age and the value of your property. Basically, the older you are, the more you can borrow. For example, at age 70, you could borrow up to 45% of the value of your home.
If you still have a mortgage, the lender will stipulate that it is to be paid off, using your own funds or with the money from your equity release. So, if you borrow £ 100,000 and have a mortgage of £ 20,000, you have £ 80,000 to help your kids get home.
Always keep in mind that you should only withdraw the amount you really need, and there are plans like withdrawal plans that will allow you to withdraw funds as you need them, rather than take the entire lump sum all at once. Remember, with lifetime mortgages, the higher the loan-to-value ratio, the higher the interest rates, which is another reason to be careful about the initial amount taken.
There are other borrowing options you might want to consider. Retirement Interest Only (RIO) mortgages and retirement mortgages could allow you to borrow much more than with a life mortgage. With an RIO, you could borrow up to 75% of the value of your home, and with a retirement mortgage, up to 90%. Both depend on your income, affordability, and credit history.
The main differences between a life mortgage and an RIO or retirement mortgage are that RIOs and retirement mortgages are residential mortgages, and you have to make monthly payments of interest only or interest and principal – just like you would have done it with the previous mortgage. on your house. You must also meet the lender’s affordability and credit criteria – which take into account your income and your ability to make repayments – both now and in the future.
Even though you can’t borrow that much with a lifetime mortgage, you don’t have to make any repayments – unless you want to – and there’s no affordability check to go through.
As a next step, I recommend that you speak to an independent, comprehensive stock release advisor who will be able to discuss your financial goals and find the right solution for you.
All of our advisors at Equity Release Supermarket are experts in their field and it won’t cost you anything to talk to us. In fact, Equity Release Supermarket won’t charge you anything until your plan is completed and your money is in the bank. You can find your local Equity Release Supermarket advisor here.
What should I ask my equity release advisor?
My partner and I have an appointment with an Equity Release Counselor booked later this month. I was wondering if you could offer some tips and advice on what we should ask of them and everything we should be looking for.
We plan to free up some of the equity in our home to make improvements and increase our income a bit. We’re both 70 and a little nervous about the reunion as we’re not sure what to expect.
It is new territory and we have no friends or family who have been through the same thing. Any advice would be welcome.
Your first meeting with a Equity Release Advisor is important, so it’s a good idea to be prepared and have all of your questions handy.
Before meeting with the advisor, there are two checks I recommend you do.
First, all stock release advisers must be regulated by the FCA and properly qualified members of the Equity Release Council. This ensures that they abide by the rules of the Council and have signed its declaration of principles. You can check if yours is on the Council’s register here – https://www.equityreleasecouncil.com/find-a-member/advisers
Second, I think you should always speak to an independent and comprehensive market advisor. Freeing up equity is a big financial decision, so you’ll want to be sure that all of your options have been explored and that you’ve found the right plan for you, now and in the future.
If your advisor is tied to a particular lender or cannot advise you on equity release, retirement mortgages, and retirement interest only mortgages (RIOs), you should be aware of this and be comfortable. with the implications before committing.
And finally, if you’re talking to an entire market advisor, think about the fees for their advice. Some companies charge a% of the amount you borrow, while others operate on a fixed fee basis. For example, at Equity Release Supermarket our advisory fees are guaranteed to never exceed £ 995 no matter how much you borrow, and they’re only payable when your plan is complete and your money is in the bank.
We also strongly recommend that you discuss your decision with your family and, if possible, invite them to the meeting – so that they can support you and also ask any questions they may have.
A good market advisor will put you at ease and during your meeting they will just want to understand your financial situation, why you are considering a release of equity and what your financial goals are.
Only then will they come up with a personalized recommendation for you, based on a range of products spanning the entire death loan market.
What’s also important is that if freeing equity isn’t right for you, they’ll tell you. You should never feel pressured into making a decision.
If you have any concerns we would be happy to help and you can call Equity Release Supermarket free of charge on 0800 802 1051.
Rate – what kind of number should we be looking at?
I am researching stock release rates and can see there are some really good deals out there. So far I’ve just scoured the internet and – based on my experience with mortgages years ago – wondered if there might be better deals going through an advisor.
So my questions are: what are the average rates right now and how do I find the best deals?
To understand the interest rates currently available on all of your loan options later in life – whether it’s life mortgages, retirement mortgages, or interest-only retirement mortgages – it doesn’t. There are only two websites that offer a comprehensive overview of the plans and mortgages available from the entire market.
https://www.equityreleasesupermarket.com is the perfect choice if you also want to learn more about the different plans and how they work. But, if you just want to focus on the plans, their interest rates, features, and benefits, then https://www.compareequityrelease.com is the site for you.
Interest rates are at an all time high right now as lenders compete for your business and there are currently many plans available with interest rates below 3%. While these rates are not as low as residential mortgages, the important things to remember about life mortgages are that the interest rate you pay is fixed for life, that there is no affordability or credit check to go through and you don’t have to make a repayment. unless you are able to do so.
To take out a capital release, regulations require you to have financial advice (which does not apply to residential mortgages) and your options are to speak directly to a lender or a capital release brokerage.
Not all lenders offer financial advice and if they do, they will only tell you about their own plans or a panel of plans. A good stock release broker should be independent, not tied to any particular lender. He will therefore be able to advise you on the plans of the whole market and find the best deal for you, like Equity Release Supermarket.
According to the Equity Release Council’s latest market report for the fourth quarter of 2020 (this is the trade body for the equity release industry), the average interest rate underwritten at the time was 4.01%. This is higher than the overall rates you’ll see, but it’s important to look beyond and consider what features and benefits you might want and how much you want to borrow, as these can influence the rate. that a lender can offer you.
To find a plan that meets your individual needs, I recommend speaking to an impartial advisor, like one at Equity Release Supermarket.