If you are 55 or over and have a property from which you want to release some equity to improve your retirement standard of living, we will provide you with our expertise to find the best deal available for you. Equity Release is a relevant option available to home owners over who has found themselves property-rich but with low cash to expend. Equity-release plans are designed to enable homeowners who do not have a mortgage on their property (or a small one that has to be paid off as part of the arrangement ) to release some of the equity in order to provide capital or supplement their retirement income. Some of these schemes involve mortgages (lifetime mortgages) and some involve the sale of the property to a provider in exchange for a benefit (home reversion plans).
Equity Release Qualified Advisers – Charles Crown Financial expert consultants will provide a personalised service, explaining carefully every step of the way. Our client relationship are built on trust and discretion.
Equity release popular uses
Lifetime mortgages are regulated mortgage contracts that are available only to older homeowner over a certain age and where the lender cannot seek full repayment until one of the following events occurs:
– the homeowner’s death
– the homeowner moves to live elsewhere without the reasonable expectation of returning (into residential care or sheltered accommodation)
– the homeowner moves to another ‘main residence’ or sells the property
– the lender exercises its legal right to take possession under the mortgage contract.
Lifetime mortgage options
A– No regular payments of capital or interest required. Interest accrued can be ‘rolled up’ to be paid at end of mortgage
B– Payment of interest required but capital not repaid until end of mortgage
C– Payment of interest and partial repayment of capital may be required, but full repayment of capital not required until end of mortgage
D– Payment of interest required, but borrower has option to convert to ‘rollup’ basis in future (hybrid scheme)
How a lifetime mortgage works
• Mortgage usually on fixed-rate basis
• Lender restricts lending depending on borrower’s age. You can normally borrow up to 60% of property value
• Capital released provides annuity, invested to provide income, or used to meet borrower’s needs
• Interest is charged at lender’s lifetime mortgage rate (usually slightly higher than standard rate)
• Interest charged but not paid is added to the loan (rolled up)
If the property is owned jointly, the mortgage would continue until the second death or vacation of the property
Borrower or their estate receive balance of sale proceeds, if any
A lifetime mortgage can be arranged on a drawdown basis. The lender agrees a maximum lending limit and the borrower can draw down lump sums as they wish, subject to a minimum withdrawal. Interest is charged on the amount outstanding, but is rolled up rather than paid each month.
The benefit of this type of loan over a standard lifetime mortgage is that interest only is calculated just on the amount actually borrowed, so the borrower has a degree of control and the debt will not increase as rapidly. It will allow the borrower to provide an annual income by drawing down capital, while maintaining control over the speed at which the debt builds up.
According to the Key Retirement Market Monitor (Key Retirement, 2016) 67 per cent of equity release sales in 2015 were on a drawdown basis.
Home reversion scheme
Home reversion schemes are an alternative to lifetime mortgages. The homeowner sells all or part of their property to the lender in return for a capital sum, an income or both. The original owner then enters into a lifetime lease agreement with the provider, usually at a nominal annual rent which guarantees him lifetime occupation.
Home reversion plans are defined in the following way:
+ a person (the lender) buys all or part of a qualifying interest in land from the homeowner
+ the reversion occupier (the previous owner) is entitled under the arrangement to occupy at least 40 per cent of the land as, or in connection with, a dwelling. The capital raised can be used as the homeowner wishes and, because it comes from the sale of a main residence, is not subject to tax
The arrangement specifies that the right to occupy the property will end:
– when the occupier dies or moves into residential care on a permanent basis
– after a specified period of at least 20 years from the date of the arrangement.
Equity release total lending 2010-2016
Need a solicitor?
Charles Crown Financial Conveyancing service will look for you a specialised quality solicitor services with the lower possible cost. Also specialised in wills. Send us your enquiry and we will contact you shortly.
Pensions / Financial advising
Charles Crown Financial has built a trusted partnership with one of the best financial advising firm of UK. Specialised in pensions and retirement issues, we will help you have better future for you and your family.