5 Myths about Equity Release
Since regulation in 2007 equity release has come along way. Lifetime Mortgages are equity release plans designed for people aged 55 and over which guarantee that you can continue to own your home, whilst giving you the financial freedom to pursue lifelong aspirations, clear-off debt, top up income or help with family matters that may arise.
- Myth: You give up ownership of your home.
Contrary to popular belief, taking out a Lifetime Mortgage does not affect the ownership of your home. The property remains yours and the mortgage, plus the accrued interest (if interest roll up), only gets repaid once the property stops serving as your primary residence.
- Myth: You can be left owing more than the value of your home.
There is a ‘No Negative Equity Guarantee’ ensures that your estate will never owe more than the value of your property when it is sold. Once the loan has been repaid, any remaining funds will be paid to your beneficiaries based on the instructions in your Will. In the unlikely event that the property sells for less than the amount of the loan, the remaining balance will be written off by the provider.
- Myth: You can’t release equity from your home if you have an outstanding mortgage.
You can still release equity from your home if you have an outstanding mortgage, provided that you can pay off the outstanding mortgage balance with either some of the equity you release or other savings you may have.
- Myth: You have to make monthly repayments with a Lifetime Mortgage.
Despite the name, with a Lifetime Mortgage you do not need to make monthly repayments. Like any other borrowing, an interest rate is charged and any interest you choose not to pay is simply added to the total and paid when you or your beneficiaries eventually sell the property.
- Myth: You won’t be able to move home.
You have the right to move your plan to another suitable property or repay the mortgage in full. Some lenders may charge a financial penalty to do this, but typically after 10 years they do not.
Please note this article is for information purposes only.