In order to qualify for an equity release scheme, you must have reached the age of fifty-five and have full ownership of a property that is in reasonable condition so that you can obtain a loan secured against it. It is better if there is no existing mortgage but if there is, it should have little time remaining & will need to be paid off prior to completion.
This is normally redeemed during the processinf of the new equity release application. Each lifetime mortgage lender has a minimum and a maximum amount that you are allowed to borrow which is dependent mainly upon the age of the youngest applicant.
There are many different types of equity release retirement solutions . One of the most common products is the lifetime mortgage which is a loan that is obtained as a percentage of the total amount of the value of your property. Most of the time, this percentage is between ten to fifty percent of the value of the property, dependent upon age. Roll-up lifetime mortgage deals require no monthly repayments. A lifetime mortgage normally lasts until the lifetime of the property owner expires. Upon his or her death or moving into long term care, the property is sold to repay the loan amount as well as the compounded interest.
Lifetime mortgages have their advantages as well as their disadvantages.
Some of the advantages are:-
- the lump sum is tax free
- they allow you to keep full ownership of your property
- they require no monthly repayments, instead the interest rolls
The disadvantages are:-
- interest compounds on an annual basis resulting in the balance doubling every 10-11 years
- the final balance will be unknown as you do not know the ultimate value of the house & how long one will live
- there maybe no inheritance left at the end of the day if house prices remain static
- ther could be early repayment charges should the equity release loan be settled early
Another popular loan is the interest only lifetime mortgage. The mechanics of this scheme is that the interest only lifetime mortgage reduces the total amount that has to be paid at the end of the loan. This is due to the fact that the borrower is required to pay the interest every month. By repaying the interest, results in the mortgage balance remaining level throughout, so long as interest only payments are maintained. Other types of lifetime mortgages include the roll-up lifetime mortgages, the drawdown lifetime mortgages, and the fixed repayment lifetime mortgages. Each type of lifetime mortgages is repaid when the borrower dies or when the borrower moves into long term care. It is possible to apply for joint lifetime mortgages with your partner.