Equity Release - Is it Right for You?

November 21, 2016 by Sam @ Pinnacle Mortgage Centre

You may have recently read about the growing issue with mortgages ending on interest only terms, with homeowners unable to pay back the mortgage debt. It is estimated that over 1 million are due to be affected by this. In some worst-case scenarios mortgage lenders have been calling in the debt, leaving people with the very real possibility of losing their home. It is an escalating problem that shows little sign of abating, given the lax criteria in issuing these mortgages in the first instance. Clients were provided interest only mortgages without knowing/appreciating the impact in the future. Unsuitable repayment vehicles meant that the debt was impossible to pay back at the end of the term. But what can be done at this point? Perhaps Equity Release is the only answer, and we are here to banish the negative myths that surround this type of mortgage.

First, and foremost, we always look at conventional methods of repayment. Can a regular repayment mortgage be put in place? With lenders looking at enhanced terms (some up to 85 years of age) it is sometimes just about possible. Although not ideal, it does enable you to retain your home, and responsibly deal with your debt. It should be mentioned that this route will rely on your ability to make payments, which will have a direct correlation with your income.

In the absence of a conventional repayment mortgage, and if you find yourself on limited income, we have found it more necessary for our clients to discuss the possibility of equity release mortgages. Understandably many are reluctant. Equity Release had a poor name off the back of some horror stories in the 70’s and 80’s, with home reversion schemes rife and clients losing their homes without realising the terms of what they had signed up for. HOWEVER, rest assured that the market has come a long way since then. We now deal exclusively with Lifetime Mortgages, which ensure that ownership is retained by the client, NOT the lender. Furthermore, many lenders have now signed up to be members of the Equity Release council, essentially a fair code of ethics that is designed to protect the homeowner and ensure that the terms of the mortgage are fair.

Fundamentally the highlights of an equity release mortgage are this:,/p>

Release a sum of money vs. the overall value of your home (up to a maximum of usually 50%).

No income assessment.

Set payment terms of monthly interest, or rolled up interest on the loan.

YOU retain the deeds to your home.

No negative equity guarantee i.e. your debt will not exceed the value of your home, ensuring no potential debt to be repaid by your loved ones.

It must be noted that an equity mortgage is very much specific to your personal circumstances but, as mentioned, they have come a long way to be attractive propositions. Interest rates hover around the 5-6% mark, so will always be higher than conventional mortgages. However, if you have a standard mortgage ending with no repayment strategy, or if you simply require a sum of money to boost your standard of living, etc, then it can be a fantastic option to explore.

If you want to find out more, then speak to us today. Pinnacle Mortgage Centre are fully regulated in this area and can make sure that you have all the information to hand to make a fully informed decision.