DIFFERENT EQUITY RELEASE LIFETIME MORTGAGE TYPES - Equity Release Bournemouth

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Call: 01202 416856 or 07862 708429
Call Julia on:
07862 708429 or 01202 416856
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DIFFERENT EQUITY RELEASE LIFETIME MORTGAGE TYPES

Equity Release Explained
Fundamentally, all equity release plans are designed to do a similar job - release cash tied up in your property.  Here we take a look at the differences between types of plans:
1. EQUITY RELEASE LIFETIME MORTGAGE: ROLL-UP LUMP SUM
This is a mortgage where you do not have to make any monthly repayments of the loan or the interest.  Interest is added to the loan and becomes payable at the of the equity release lifetime mortgage.
FEATURES
  • Paid off when you die, move into long-term care or sell the house.
  • You mortgage your property.
  • No repayment date.
  • No negative equity.
  • Loan increases each year.
DISADVANTAGES
  • You must pay off any outstanding secured loans.
  • The amount left to beneficiaries will be reduced.
  • There may be charges for early repayment
  • You may lose entitlement to means tested benefits.

ADVANTAGES
  • You still own the property.
  • No monthly payments.
  • You can move to another property.
  • Regulated by the Financial Conduct Authority.
  • Receive a lump sum payment.

2. EQUITY RELEASE LIFETIME MORTGAGE: ROLL-UP DRAWDOWN

This is similar to a lump-sum Equity Release plan, but comes with more flexibility.

You decide on the maximum you feel you will need to borrow. You can then choose to  access or 'draw-down’ against this amount, a portion at a time over a period of time.  The interest is added on the amount you draw-down, so the interest builds up more slowly than if you released the full amount at the outset.
FEATURES
  • Paid off when you die, move into long-term care or sell the house.
  • You have a borrowing facility.
  • You draw down cash lump sums when needed.
  • Available from age 55.
  • You mortgage your property.
  • No repayment date.
  • No negative equity.
  • Loans increases each year.
ADVANTAGES
  • You still own the property.
  • No monthly payments.
  • You can move to another property.
  • Regulated by the Financial Conduct Authority.
  • Receive an initial lump sum payment.
  • Flexibly draw further amounts.
  • Interest only accumulates on sums drawn down.
DISADVANTAGES
  • You must pay off any outstanding secured loans.
  • The amount left to beneficiaries will be reduced.
  • There may be charges for early repayment.
  • You may lose entitlement to means tested benefits.

3. EQUITY RELEASE LIFETIME MORTGAGE: INTEREST ONLY

Similar to a conventional mortgage offered by high street lenders.  Interest is paid monthly on the amount borrowed.  No repayments are made on the capital.  If payments are missed the loan converts to a roll-up mortgage rather than be liable for repossession.
FEATURES
  • Paid off when you die, move into long-term care or sell the house.
  • Interest paid monthly.
  • You have a borrowing facility.
  • You draw down cash lump sums when needed.
  • Available from age 55.
  • You  mortgage your property.
  • No repayment date.
  • No negative equity.
DISADVANTAGES
  • You must pay off any outstanding secured loans.
  • The amount left to beneficiaries will be reduced.
  • There may be charges for early repayment.
  • You need a regular source of income that will last into retirement.
  • You may lose entitlement to means tested benefits.
ADVANTAGES
  • You still own the property.
  • You can move to another property.
  • The outstanding loan does not increase  whilst payments are being made.
  • No repayment date.
  • Regulated by the Financial Conduct Authority.
  • Receive an initial lump sum payment.
  • Interset rate is fixed from the outset.
  • More chance of a greater sum being left to your beneficiaries.
4. HOME REVERSION PLAN
A home reversion plan is a type of lifetime mortgage that allows you to exchange the ownership of some or all of your property for a lump sum of cash, whilst allowing you to stay in your property, rent-free, for as long as you live subject to the lender's terms and conditions. This is also known as a 'lifetime lease' and is only available to those who are age 55 or over.
FEATURES
  • Paid off when you die, move into long-term care or sell the house.
  • You can choose to sell a proportion of, or your entire home.
  • If you don't sell all of your property at the outset, you may not be able to seek a further release of cash at a later date if needed.
  • The cash amount your receive will depend on your age, gender, the current value of your property and the proportion you sell.
  • Available from age 55.
ADVANTAGES
  • Cash release is tax-free and can be spent how you wish.
  • No monthly payments.
  • You benefit from any future increase in the value of your property from the proportion you retain.
  • The older you are, the more money you will generally be able to release.
  • You can move to another property.
  • You know at the outset what share of your home you will be leaving to loved ones in your estate.
DISADVANTAGES
  • If you sell 100% of your property, there will be no property value to leave to your beneficiaries.
  • If you die shortly after taking out a home reversion scheme, your estate will receive less as the full market value is not given at the outset.
  • It is expensive to reverse.
  • It may impact the size of yoru estate and may affect your entitlement to means-tested benefits either now or in the future.
  • You can buy back the proportion of your house you sold, but you would be buying it back at market value and not at the discounted rate you sold it for.
5. RETIREMENT INTEREST ONLY MORTGAGE
A retirement interest-only mortgage is very similar to a standard interest-only mortgage.  You will only pay off the interest each  month, meaning you should be more likely to have something to pass on as inheritance, or pay for long-term care.
FEATURES
  • Paid off when you die, move into long-term care or sell the house.
  • You only have to prove you can afford the monthly interest repayments.
  • Aimed at older borrowers over 55.
  • Make monthly repayments to cover the cost of the interest on your loan.
ADVANTAGES
  • No need to demonstrate a suitable plan for repaying the mortgage.
  • More likely to have something to pass on as an inheritance.
  • Avoid having to downsize to a smaller property.
  • Generally cheaper when compared to most lifetime mortgages.
  • You can unlock some of the equity in your home to pay off outstanding debt.
DISADVANTAGES
  • The loan term is not fixed.
  • Need to pass the mortgage's affordability checks to prove you can afford the interest only repayments.
  • Negative equity guarantee is not available.
  • Your home is at risk if you do not keep up the repayments.
  • The amount you can borrow is vased on your retirement income and your loan to value ratio.
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Contact Us

Address:  7 Ravine Road, Bournemouth, BH5 2DT
Phone:  07862 708429 or 01202 416856

Julia Crump, trading as DFP Equity Release, is an Appointed Representative of TenetLime Ltd which is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under reference 779271.ng
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