Telephone:
0191 695 9493

Email:
info@northeastequityrelease.co.uk

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.

The Equity Release Market is constantly evolving. Providers of equity release products are continually innovating to create flexible lifetime mortgages and other products to suit clients in a variety of financial and personal circumstances.

Following the growth in popularity of equity release products in 2021, approximately 20,000 new customers have already unlocked wealth in their properties in the first quarter of this year.

Piles of coins with small model houses on top

How are Lifetime Mortgages adapting?

The Equity Release Council confirmed this week there are now 665 mortgage products available in the marketplace which is an increase of 65.8% from 401 products in just 2 years since 2020 as lenders continue to provide more flexibility and innovative features to provide a better solution for more customer circumstances.

One provider has just launched a new lifetime mortgage with early repayment charges that only last for the first 5 years, making the product more reflective of a standard mortgage with an unsurpassed increase in potential LTV ratio of 60.7% for those clients looking for the maximum cash release (subject to age)

How can we help?

The explosion of new products to the Equity Release Marketplace can feel overwhelming for prospective customers. By working with North East Equity Release, we can help take the stress and anxiety out of finding the right product for you.

We will take the time to research the whole of the market and assess the features, benefits, drawbacks and penalties involved in every Lifetime Mortgage product.

Whether your priority is inheritance protection or you are concerned about early repayment charges, future home moves, interest rates or how equity release could affect your state benefits, we have the answers to your most pressing questions.

Elderly couple high-fiving while holding documents.

Remember that with any Lifetime Mortgage product, you’ll always keep your home until you move into long-term care or pass away.

If you’re interested in learning more about Flexible Lifetime Mortgages, don’t hesitate to get in touch. We offer a free, no obligation consultation, free of any unnecessary jargon.

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.