Is there a difference between equity release & lifetime mortgage?
There has been a lot of talk about equity release. Is it a great idea and if there are any disadvantages? As with all things, there are pros and cons, but knowing what they are can help you make the right choices. We look at how a lifetime mortgage and a home reversion plan differ according to top equity release providers. See the information below to see if you may be ready to consider an equity release mortgage plan.
What’s equity release?
Equity release is similar to a loan that you take out against the property value of your home.
After carefully evaluating your home, a broker will help you follow the steps to taking out an equity release mortgage that suits your lifestyle.
What’s a lifetime mortgage?
A lifetime mortgage and an equity release plan are the same things.
Both give you a lump sum of cash you can distribute as you choose and allow you to pay back the equity release plan over 10 years.
According to our equity release expert, Jason Stubbs, You can choose to pay it off sooner but stand a chance of paying a high fee.
What’s the difference between a home reversion and equity release?
There are 2 main equity release plans: A lifetime mortgage and a home reversion plan.
Let’s take a look at the difference between the 2.
- A lifetime mortgage allows you to live in your home while you repay your equity release.
You receive a lump sum of cash or monthly instalments and can use it for whatever you like.
When you die without repaying the entire outstanding amount, your beneficiaries will have the choice to sell your home to cover the unpaid balance or have 12 months to come up with the money using other financial means.
- A home reversion plan is when you directly sell a percentage of your home or property value to a lender for a lump sum payout.
Once you die, the lender will be allowed to sell the property and take whatever money is owed to them before they give your family what is left of the sale.
You will be allowed to live in the house, but the deal does affect your beneficiaries in the long run.
Both plans work for many, but home reversion plans tend to affect those who stand to inherit from the property the most.
How does equity release affect my mortgage interest?
Equity release affects your mortgage interest by adding the interest on the amount owed when you have taken out an equity release plan.
If you have an existing mortgage, you could use the equity release payout to cover that cost and then pay the equity release on its own.
If you are only paying for equity release, then you will only pay the interest owed on the equity release mortgage.
Common questions
Where can I find more information about equity release?
You can learn more about equity release from any equity release brokers or providers.
As long as they are registered with the ERC, they can provide you with the exact information you need, such as interest rates, payment periods and fees.
Conclusion
Equity release can provide a lot of positive aspects to those who need to secure themselves during retirement.
The more information you have, the easier it will be for you to decide whether your equity release is for you.
If you are still unsure, take the time to speak to an equity release broker about evaluating your property and find out if equity release can work for you.
