Equity Release guide discussion

J_e_l_b

@Nick_Lovell Thanks for that, I've contacted an advisor from the link that you sent me

jcorbygas

I have only recently thought about Equity Release to help us out of our predicament. I am 60 and my husband 63. We have an interest only mortgage coming to an end in 2 years time. The amount owing is £340,000 and we have no way of paying this. (Totally aware of the downside of interest only) Our property is worth between £550,000 and £600,000 or more. We are both still working but wish to retire within next 2 years. Husband has private pension. I was advised that we could actually use an Equity Release scheme, so that we could move house - say to one valued at £325,000 - use our equity from our existing house ie £225,000 - and get equity release on the balance - £100,000. Is this correct? and is it straightforward to do?  If this is viable my other query (apologies if it’s been asked and answered before), what are the options of repaying the loan if I were to receive an inheritance a few years into the loan. Would this be allowed? 

Thanks for any feedback.

Nick_Lovell

@jcorbygas You are correct - you can use a lifetime mortgage as a purchase option to fund the £100k. It is very easy to transact and is no different than purchasing a property using a traditional mortgage, as it is simply a first legal charge. I always recommend using a dedicated equity release solicitor has they will know the process and are far more efficient. I'll message you details. You can repay a lifetime mortgage at anytime, however there can be substantial early repayment charges in the early years and never consider during the first 5 years. There are also gilt based early repayment charge options, that can work to your favour if gilts increase and you can exit these without penalty but if the gilt rate falls then it can be as much as 25% ERC, so you need to take sound financial advice. A responsible adviser will never recommend a lifetime mortgage if you intend to repay in the first 5 years as it simply is not a short term lending vehicle. Hope this helps!

jcorbygas

Thanks for coming back to me so quickly Nick. So I am actually looking at a Lifetime Mortgage rather than Equity Release?  Are these credit scored? 

If I did get an inheritance within 5 years I would have the option of investing in a pension for myself until no ERC fees were payable I suppose.

Nick_Lovell

@jcorbygas - Equity Release is the headline for 2 options in the market - one being a lifetime mortgage and the other is a home reversion plan (rarely recommended) and also potentially Retirement Interest Only Mortgages. You certainly need a lifetime mortgage for your transaction, this is a first legal charge mortgage and you retain 100% ownership of the property. You can service the interest, make overpayments typically up to 10% per annum or you can make no payments. This is why they are not affordability assessed and whilst you are checked via a credit scoring platform, this is more for identity and money laundering checks. If there is previous credit history as long as not recent then this is generally acceptable, but differs from lender to lender. So CCJ's and even bankruptcy is not an issue as long as discharged, so I would not worry about credit scoring as the main criteria is based on the value of the property against the age of the youngest borrower to determine the interest rate and loan to value maximum. You will need to provide banks statements and undertake a normal financial fact find, but you do not need to have a certain level of income to qualify.  Property must be standard construction, and avoid anything close to commercial, the lenders generally are risk averse to residential property near commercial premises. Also watch out for solar panels - ideally need to be owned not leased. 

TELLIT01

Are there any on-line calculators to give a rough idea of the maximum amount which can be taken, other than those linked to the various providers and requiring e-mail address etc?  I don't want to give them my e-mail and/or phone number when I'm simply investigating the broad market.  I did that once before and very soon after received a phone call.  The person on the other end got quite agressive when I said that all I was interested in was finding out how much I might be able to get.  That was a few years ago.

QrizB

TELLIT01 said:

Are there any on-line calculators to give a rough idea of the maximum amount which can be taken, other than those linked to the various providers and requiring e-mail address etc?  I don't want to give them my e-mail and/or phone number when I'm simply investigating the broad market.

For that sort of thing I use Guerilla Mail https://www.guerrillamail.com/ (other anonymous email services are available).
Keep the window open until you receive whatever it is that they are going to send you, then close the window and forget all about it.

RetSol

The person on the other end got quite agressive when I said that all I was interested in was finding out how much I might be able to get. 

I received a lot of unwanted phone calls from annuity providers when I researched annuities on the internet a couple of years ago.

Since then, as a result of scammers phoning several times a day on occasion since the start of the pandemic, I have assigned a separate ring tone to the numbers which I have stored in my telephone handset.  Calls from elsewhere, I don't answer. 

Nick_Lovell

TELLIT01 said:

Are there any on-line calculators to give a rough idea of the maximum amount which can be taken, other than those linked to the various providers and requiring e-mail address etc?  I don't want to give them my e-mail and/or phone number when I'm simply investigating the broad market.  I did that once before and very soon after received a phone call.  The person on the other end got quite agressive when I said that all I was interested in was finding out how much I might be able to get.  That was a few years ago.

I'll message you a link to calculators you can use without any personal input.

TELLIT01

Thanks Nick_Lovell  I'll check them out later.