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0191 695 9493

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Repaying Your Interest Only Mortgage: Equity Release 

Interest Only Mortgages come with a range of advantages that are attractive to homebuyers, such as lower monthly payments and potential investment opportunities. However, many people who have taken Interest Only mortgages out previously often find themselves coming to the end of their mortgage term without any clear way of paying off the remaining capital on the loan. This is where finding alternative means to repay an interest-only mortgage becomes crucial, ensuring homeowners have strategies in place to settle the outstanding balance when the term ends.

With a Lifetime Mortgage, you may be able to repay your Interest Only Mortgage so you can continue to live in your home. 

You can then continue to pay the interest each month on your Lifetime Mortgage to avoid the effect of compounded interest and the subsequent erosion of equity in your home,  however, you also have the option to make no monthly repayments at all, which can often help if you are nearing, or are already in retirement and therefore may have less disposable income. 

As a qualified and highly experienced mortgage adviser in Newcastle, covering Northumberland, Gateshead and Tyne and Wear, Joanne can guide you through this process. 

Equity Release Explained 

Equity Release is the “umbrella “word used to describe financial products that can enable you to release the “equity” held in your home. 

“Equity” is the value of your home less any mortgage / secured against it.

The only type of “Equity Release” product we provide advice on and recommend is a Lifetime Mortgage as this allows you to retain 100% ownership of your home. This is often referred to as an Equity Release Mortgage. Among equity release companies, we offer comprehensive advice on all questions you might have. 

Interest Only Mortgages: Equity Release via Lifetime Mortgages

With a Lifetime Mortgage, you can unlock a lump sum from your property which can be used to repay the outstanding balance on your mortgage. These funds are completely tax free as the money is already yours in the first place. 

For many people, this can be the only option for paying off the remaining balance at the end of the term of an interest only or a repayment mortgage. 

It’s natural to have questions and concerns about whether this is the right decision for you, and we will help you understand everything you need to know give you the best advice tailored to your circumstances in Newcastle. 

We will always look at all of the options available to you based on your individual circumstances and where possible recommend alternative solutions also.

Get in Touch 

For friendly advice and more information, give us a call today for best advice on repaying an interest only mortgage and equity release in Newcastle. 

Appointments can be held by telephone, video call or  in the comfort of your own home.

Get a head-start by seeing how much equity you could release from your home using our free calculator tool.

Martin Lewis advice on equity release

When it comes to managing your finances, Martin Lewis is a bedrock of sound advice. But what does the Money Saving Expert founder say about equity release? 

Journalist, presenter, campaigner and founder of UK consumer website, Money Saving Expert, Martin Lewis has made an impressive career out of helping people to make smart choices when it comes to saving money. As a result, millions of Brits regularly look to him for trustworthy, unbiased advice when it comes to handling their finances. So, let’s take a look at Martin’s hot take on equity release!

What does Martin Lewis think of equity release? 

Martin Lewis does not explicitly recommend equity release, and he’s right not to do so. This type of mortgage product is not for everyone, and it would be wrong to suggest that equity release can serve as a cure-all to your financial woes! 

In a nutshell, Martin Lewis believes that over-50s who are considering equity release should arm themselves with all of the facts regarding lifetime mortgages and make sure that they have considered any alternatives – such as downsizing or selling assets – before they opt for a lifetime mortgage. Pretty good advice, if you ask us! 

Martin advises that borrowers need to be conscious of the fact that equity release products will impact the amount of inheritance they are able to leave loved ones. Ultimately, however, he stresses that it’s essential for you to prioritise your own standard of living first and foremost when making your decision. If equity release will help you to have a more comfortable, enriching retirement, it’s definitely worth considering. 

As such, if downsizing is not an option, you have no saleable assets, and poor cash flow is having a detrimental impact on your quality of life, Martin would advise you to seek out the help of a professional adviser and consider equity release as a viable solution to financial challenges you may be facing in later life. 

Decided to investigate equity release further? Here are Martin Lewis’ tips for smart borrowing

  • Make sure to only borrow what you need

Martin’s number one tip when it comes to equity release is to only borrow what you need. If you want to be super savvy, you might want to consider a drawdown lifetime mortgage, as this type of product gives you full flexibility to access your money as and when you need it. With this product, you’ll only pay interest on what you borrow, and not on the funds being held in reserve, thus shrinking the size of your loan.

  • Check your lender is a member of the Equity Release Council 

This is an important one. It’s essential that you check your lender is a member of the Equity Release Council (ERC). Lenders with membership to the ERC will provide you with a guarantee that you’ll never owe more than the value of your property, amongst other safeguards.

  • Seek independent financial advice 

Here at North East Equity Release, we are qualified advisers who specialise in arranging lifetime mortgage products for our clients. We have access to the whole of the market and can find you the most suitable lender and equity release plan for you.

  • Double-check your benefits 

Before opting for a Lifetime Mortgage, check that this type of loan will not impact any benefits that you are currently in receipt of, such as pension credits or universal credit. Here at North East Equity Release, we can help you to clarify this. 

Already an existing lifetime mortgage customer? 

If you have previously taken out an equity release loan some years ago, Martin Lewis recommends that you take a look at whether or not you can switch to a better deal. Over the last decade, interest rates have fallen, which means you might be able to save some money by switching. Chat with us to find out if this is an option for you.

*Sourced from Martin Lewis’ moneysavingexpert.com article Should You Equity-Release? 

North East Equity Release can help you to find the right Equity Release product for your needs. Get in touch today.

smiling older woman holds key for new home

This is a very common question asked by homeowners who are considering a Lifetime Mortgage product, and it is an important one to ask.

Do I still own my home with Equity Release?

Yes. You are still the owner of your home, even if you have a Lifetime Mortgage secured against it.

The equity release lender does not own your property, they simply register their financial interest in your property by way of a charge which is registered with the Land Registry Office in the same way as a standard mortgage lender does.

This charge grants the lender the right to recover their money if you sell the property or the mortgage is not repaid within 12 months after the surviving applicant moves into long term care or passes.

Can I move house with Equity Release?

Yes. We only recommend mortgages from lenders who are members of the Equity Release Council and therefore their mortgage products must adhere to a set of minimum standards, one of which is:

The client must always have the right to move to another property subject to the new property being acceptable to the product provider as continuing security for the equity release loan.

By seeking guidance from a professional adviser who specialises in Equity Release, you can ensure you are getting the right product for your needs, from a reputable lender who holds membership with the ERC, covering you for all eventualities.

North East Equity Release can help you to find the right Equity Release product for your needs. Get in touch today.

letter blocks spelling 'equity'

If you are thinking about releasing equity from your home, you may be wondering just how much you can borrow exactly.

What is Equity Release?

Equity Release is the term used where homeowners over the age of 55 access their property wealth by releasing a tax-free cash lump sum, usually by way of a mortgage designed to assist later life borrowers called a Lifetime Mortgage which is not income assessed.

How much can I borrow?

The maximum amount you can borrow is mainly based on age and the property value.

However, there are several variables that may also impact on how much you can borrow, including your age, health, the value and condition of your residential property and whether or not it is a joint application that you are making.

Your age

Age is the primary determining factor when it comes to how much you can borrow.

Put simply, the older you are, the more you are to be able to borrow.

If you are closer in age to 55, you will not be able to borrow as much as someone who is 70+.

This is due to life expectancy, so if you choose not to service the interest and allow it to roll up over the lifetime of the mortgage, the lender needs to be assured that there will still be enough equity in the property at the point of sale to repay the loan including any interest accrued. As such, the potential term of the mortgage needs to be factored in, too.

The value and condition of your property

This is an important factor when determining how much you can borrow.

Your property will be subject to a professional valuation prior to your loan being approved, in order to ensure the lender can be confident that they are lending against a property that will maintain or increase in value over time.

As such, factors including the area, type of property, overall condition, the building’s materials, average house prices in the area and potential growth will be assessed.

If you are wondering how much you could borrow with Equity Release, we can help. Get in touch today.

 

 

If you have landed on this blog post, then we presume you are on the hunt for valuable information about equity release and are wondering if it is right for you.

As equity release specialists, you may be under the assumption that we have product bias towards equity release, however, that is not the case. Equity release is not always the answer, and as members of the Equity Release Council, we have a duty to walk every customer through alternatives before recommending an equity release product to them. For some customers, downsizing, applying for grants, or other later-life lending solutions may be more suitable for their circumstances.

At North East Equity Release, we have many consultations in which the individual may be set on equity release, however, after we have offered expert advice and alternatives, they have ended up with a completely different financial product or solution.

Below is an example of one such client.

old man looking out of window

When Equity Release is not suitable:

Harry is an 89-year-old man who owned his home outright. He got in touch with North East Equity Release to arrange an appointment and discuss unlocking a large sum of money from his home. Upon meeting with our adviser, Harry disclosed that his wife had passed away the previous year.

Harry was now concerned that when he died, all of his estate would go to the Crown. Determined to not let that happen, Harry wanted to release as much money from his property as possible and put it in his bank account.

However, as Harry had no intentions of spending the money and did not have a Will, under the Rules of Intestate, this money would still go to the state.

The solution… A Will

During the consultation, our adviser recommended Harry arrange a Will and discussed potential beneficiaries to which Harry could leave his estate, such as his friends, the Church and charities close to his heart. The adviser also helped Harry to contact a trusted local solicitor so that a Will could be arranged and Harry’s money and possessions could be distributed exactly how he saw fit.

Will document representing when equity release is not the right solution for client

When equity release is a good idea

Maureen is a 61-year-old lady whose life drastically changed when her husband passed away suddenly. While there was no mortgage on the home, Maureen did not work and was not yet in receipt of her state pension, which left her living off savings.

With her savings running low and the cost-of-living pressures rising, Maureen was concerned that she was not going to be able to afford to stay in her home. While her husband was alive, the couple had planned on downsizing, however, due to the change of circumstances and Maureen’s strong emotional attachment to the property, she felt she now wanted to stay in her current property for another five years or so.

Mature lady in kitchen at home thinking about an equity release lifetime mortgage

The solution… A Lifetime Mortgage

Following the principles and standards defined by the Equity Release Council, we gained an in-depth understanding of Maureen’s circumstances and discussed all of her options. Maureen opted for a Lifetime Mortgage which we arranged on her behalf.

The Lifetime Mortgage provided Maureen with an initial lump sum which enabled her to carry out some essential repairs to the property she was living in. The product included a drawdown facility, which meant that Maureen had access to cash as and when required to assist her with the cost of living. With a Lifetime Mortgage, Maureen was not required to make any monthly repayments.

While Lifetime Mortgages can be transferred to a new home (subject to lender policy), in this case, Maureen planned on downsizing, repaying the mortgage and buying cash when she moved.

As such, the priority was to source a Lifetime Mortgage with the lowest Early Repayment Charging (ERC) structure. We sourced a product that had fixed Early Repayment Charges which were reduced over the years and were just 3% of any outstanding balance in the fifth year, when Maureen anticipated moving home and repaying the mortgage.

We were also able to calculate the potential early repayment charge based on the initial lump sum, her predicted drawdown and accrued interest, which were a very small price to pay in order to allow her to stay in a home that she loved.

Is equity release right for you?

Equity release can be a complicated and complex decision to make. It’s essential that you seek professional financial advice before making any commitments. As qualified equity release advisers and members of the Equity Release Council, we will always suggest alternatives and help clients find the right solution for their unique circumstances.

For a free, no-obligation chat with a professional, contact us here.

Equity release in return for a lifetime mortgage

If you’re in two minds about whether to free up some of the wealth attached to your home, it’s important that you are aware of up-to-date and accurate information on equity release in the UK.

What is equity release?

The term ‘equity release’ can sometimes be difficult to understand, but in simple terms, it refers to the process of letting homeowners aged 55 and over release tax-free cash from the value of their home.

The amount you can release is based on your age and how much your home is worth.

You can access the money as a cash lump sum at the outset or as a facility to access on an “as and when” basis at any time in the future.

The most popular type of equity release is a lifetime mortgage.

Lifetime mortgage

There are many positives to applying for a lifetime mortgage, such as:

●      You can take out a lump sum of tax-free cash in one go

●      You have the freedom to spend this money however you want

●      Releasing equity with a lifetime mortgage means you don’t need to move out of your home or downsize

●      There’ll be nothing to repay until you die or move into full-time care

Is now a good time?

If you are considering taking out a lifetime mortgage, now could be a good time to enquire, as mortgage lenders are slowly starting to reduce their interest rates following the spike in interest rates post the mini budget in September 2022.

The current average lifetime fixed mortgage interest rate as of December 2022 is between 6-7%, depending on the lender.

The highest rate seen in November 2022 was 8.95%, illustrating a significant drop in the space of just a month, with experts predicting the pricing of fixed mortgage interest rates to continue to stabilise throughout 2023

The interest rate you will be offered will depend on different factors, such as your age, the level of your requested loan in relation to the value of your home and other features included in your plan.

Considering a lifetime mortgage? Our qualified equity release advisor Joanne can help you find lenders with good interest rates.

Contact us to see how we can help.

For older homeowners in need of a financial boost, Equity Release could provide the perfect solution to cash flow problems.

Also referred to as Retirement Mortgages, Later Life Mortgages and Lifetime Mortgages, these loans enable borrowers to tap into the cash that is tied up in their home. This can make it possible for homeowners to meet other financial obligations and necessities or enable greater financial freedom during retirement. Like any loan product, Equity Release can feel daunting. However, these types of loans are simply another type of mortgage.

To dispel some of the concerns and confusion around Equity Release loans, we’re here today to talk about the ins and outs of this type of mortgage to create a clearer picture of how equity release could help you.

Coins on a table in front of a model house

What exactly is Equity Release?

Equity release loans are just another mortgage product when it comes down to it, which is a loan secured against your property while allowing you to continue to retain 100% ownership of your home and provide you with access to a tax-free cash lump sum from your own wealth tied up in your home which you pay interest to a lender for the use of instead of realising the wealth by selling the property.

There are 4 key differences between a standard mortgage and an equity release lifetime mortgage:

1) How the level of borrowing is assessed.
A standard mortgage is assessed by your income and affordability, as you are contractually obliged to pay the capital and interest back each month. An equity release mortgage is based on your age (life expectancy) and the value of the property. In essence, the loan and any interest is usually repaid from the sale of the property at some point in the future.

2) The freedom to choose to make no monthly payments
With an equity release mortgage, you can choose to make no monthly payments and allow all of the monthly interest to roll up over time. Alternatively, you can service part or all of the monthly interest and/or even make capital repayments in order to preserve your equity and even reduce the outstanding loan

3) Transparent repayments

This is a profound difference between modern day equity release mortgages and historical mortgages that still carry understandable bad memories. In addition, unlike historical plans, these mortgages now offer fixed, transparent, and limited early repayment charges if the client wishes to repay the mortgage at any time.

4) The term of the mortgage
A standard mortgage has an end date (also known as the term) by which the loan must be repaid. An equity release mortgage has no term with the loan usually being repaid upon death, entering long-term care or sale of the property.

Ultimately, equity release loans open the possibility for homeowners to unlock their wealth tied up in their home by releasing a cash lump sum from their home’s value or ‘equity’. The equity of your home is simply the property’s value, minus any outstanding mortgage or other forms of lending that are secured on it.

What benefits can equity release bring?

Letter blocks which spell equity

The key attraction of Equity Release is that borrowers can raise capital whilst retaining one hundred percent home ownership.

For many, the main plus point of this is that it provides money that they can use to enjoy their retirement. After a lifetime of working and saving in order to raise kids, run vehicles and meet mortgage repayments, many retirees are looking to finally release some of their financial burdens during their long-awaited retirement. Dream holidays, new hobbies and home improvements are just a handful of the things that are made possible through this scheme.

Such loans may also greatly relieve the pressures caused by the current cost of living crisis in the United Kingdom, enabling older homeowners to cope with inflation whilst maintaining a comfortable standard of living.

Who is eligible?

Homeowners aged 55 and over and who own their own property are eligible candidates for an Equity Release Mortgage.

To take out this type of mortgage, however, you must be looking to release at least £10,000 in equity from your property.

The value of your home will, of course, also have an impact on the level of loan available to you.

What about interest, how does that work?

The interest rate is fixed for the lifetime of the loan and is based on the amount you borrow in relation to the value of your home.

As there are no contractual monthly repayments,(although you can choose to service the interest and make capital repayments if your wish) the interest accrued is rolled up for repayment when the home is sold.

A mortgage adviser who specialises in equity release products will be best positioned to advise you on the ins and outs of your interest.

Can I still leave an inheritance?

Of course, the main concern for many when it comes to equity release is inheritance. Like the majority of people, you probably wish to leave something behind for loved ones after your departure. If you’ve worked hard to pay off the mortgage on your property, it’s likely that you have always imagined that it would be the value of this property that was passed on as an inheritance to those you leave behind.

Of course, it is essential to recognise that your equity release loan will essentially decrease the amount that you can leave an inheritance to your loved ones. Thankfully, however, many Lifetime Mortgage products enable borrowers to protect a percentage of the value of their home through an Inheritance Protection Guarantee.

If you’re considering an Equity Release loan, it’s essential you seek advice and guidance that you can trust. That’s where North East Equity Release comes in. Simply contact us today to find out how we can help.

At North East Equity Release, we know there is some confusion around modern equity release products, so we’re here to dispel the myths!

This year, it was revealed that 67% of homeowners over the age of 55 were not clear on what equity release was, with 18% claiming that they had been put off equity release due to stories they had heard about mis-sold, unfit for purpose products.

We are here to set the record straight! We’ll shine a light on common equity release myths about costs, inheritance, interest rates, and more, so you can take this flexible, versatile product into account when comparing financial solutions for you and your family.

Myth #1 I’ll lose my home!

YOU WON’T LOSE YOUR HOME! Many homeowners view equity release as essentially selling their home – but this couldn’t be further from the truth.

Releasing equity simply means that you are unlocking cash from the value of your home and using it however you see fit while maintaining 100% ownership. You still have the right to live there until the end of your life, or until you decide to move into long-term care. Just in case you missed it, we’ll repeat it. YOU WON’T LOSE YOUR HOME!

Myth #2 Equity release is expensive

Again, not true! Equity release can be surprisingly cost-effective. According to a report from April 2021, the average interest rate on equity release products was down to 4.07%. Furthermore, if you choose to create a cash reserve account to access funds in the future (as opposed to taking out an initial lump sum), you can avoid a build-up of interest and will not be charged until the reserve money is released.

The idea of monthly repayments can be daunting. We’re happy to inform you that when you release money from your home, you will be free from those monthly repayments. Whilst interest will accumulate over time, this does not need to be paid until your property is sold. You can also choose to make voluntary repayments if you wish and you can repay the loan in full at any time, although an early repayment charge may apply.

Myth #3 I won’t have anything to leave for my loved ones

The money released from your home can be used in whatever way you see fit. Many people opt to use the funds to provide loved ones with an early or “living inheritance,” giving them the chance to help a child or grandchild with a deposit on their first home or paying off student loans.

With some plans, you can protect a portion of equity as inheritance, or you can opt for a serviced interest peace of mind plan to avoid the interest build-up. At North East Equity Release, we can advise you on these features that many leading providers offer.

senior woman sitting on sofa with her grandchildren

Myth #4 I’ll end up owing more than what my home is worth

As long as you ensure that your lifetime mortgage has a no-negative-equity guarantee, and opt for an Equity Release Council approved lender that meets product standards, you won’t have to worry about owing more than your home is worth.

If the value of your home decreases and no longer covers the amount you have borrowed, the remainder of the loan will be written off.

Speak to Joanne Manghan, our highly experienced Equity Release Adviser, for tailored, free advice on Lifetime Mortgages.