Equity Release

JukeHogan

Hi all, could do with a bit of advice please.

We’re looking into releasing some equity (poss £60k) from our house. I’m assuming a remortgage rather than equity release scheme would be best/cheaper? This is opposed to downsizing as we like where we live. 

What would be the best type of mortgage to get & how long should we have it over? The house is worth approx £375k & is fully owned. We are in our late 50’s & both currently employed. 

Thanks in advance. 

MWT

JukeHogan said:

We’re looking into releasing some equity (poss £60k) from our house. I’m assuming a remortgage rather than equity release scheme would be best/cheaper? 

It depends how you define 'cheaper'?

At one end of the scale, equity release could be considered 'free' on a monthly basis as there is no need to repay anything at all until you are both in long term care or have died and can just sell the house to repay the loan.

... but the impact on the remaining equity in your home would be more severe as the interest would roll-up over time to a very significant proportion of the remaining value so that would make it expensive if you care about the remaining equity...

A traditional mortgage is relatively expensive on a monthly basis but each month that passes leaves you with a little more of the equity in the home in your hands, so if you care less about the monthly cost and more about the equity it is a better option for you.

Talk to a broker, preferably one that can handle retirement products and equity release, and work out what your priorities are and which options are available to suit those priorities as there are many options between the two extremes I've listed above...

Keep_pedalling

You are a bit young for ER. As above speak to a mortgage broker. 

gwynlas

 All mortgages depend on affordability but as you are both working this should not be a problem, particularly if you have additional pension income to look forward to you could go for up to 20 years.

What I would suggest is that you budget to make your home future proof if you wish to stay there with downstairs shower room/wc/ If refitting kitchen go for deep pan drawers rather than under counter cupboards. Think about the garden and future maintenance.

This might cost more than the £60K  but you can always make overpayments

dreaming

I am nearly 70 and just completed an equity release in order to both help my daughter with her house purchase and for some work on my property. I have chosen to pay off the interest portion each month and can also repay up to 10% of the capital amount, which I may start to do in a year or so. One thing that was unknown to me until I really looked into this is that the amount of cash (percentage of house value) you can release tends to increase with age - so you may not be able to get what you require. I have kept my release as low as possible but with an additional drawdown facility. I am treating it as a loan/traditional mortgage though and hope to pay it off (or as much as possible) before I die or need to pay for care provision.

MWT

dreaming said:

One thing that was unknown to me until I really looked into this is that the amount of cash (percentage of house value) you can release tends to increase with age - so you may not be able to get what you require. 

Since they are looking for less than 20% of the value in this case they should not have any problem getting what they need, even though they are both under 60, as long as the property is suitable of course.

Also worth noting that in the case of joint borrowers it is the age of the youngest life that is used, and as well as age, health can play a part if their are any life-limiting conditions.