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Finding the right later life lending scheme for you is a significant decision. However, it can be confusing as there are a wide variety of brokers and solutions available in the market.
Finding the right later life lending scheme for you is a significant decision. However, it can be confusing as there are a wide variety of brokers and solutions available in the market.
If you are a homeowner over 55 and are considering equity release for the first time, we have collected the most frequently asked questions and answers below, so that you can make an informed choice about whether later life lending is suitable for your needs.
Can’t find what you’re looking for? Please get in touch with one of our later life lending specialists for a no-obligation consultation. We make sure that after every consultation, you fully understand how Equity Release works and relates to your financial position. This enables you to make an informed decision and gives you the flexibility to decide in your own time.
Over 55 equity release schemes are an increasingly popular way for older homeowners to boost their retirement income. You can choose to receive the equity released from your home either as a lump sum or as regular payments, or a combination of both — providing flexibility in the way that you choose to access these funds. There are almost no restrictions on how you use the money (although lenders won’t give it to you for gambling or investing).
There are three types of equity release schemes: Home Reversion, Lifetime Mortgage plans and Retirement Interest Only (RIO) mortgages.
A Lifetime Mortgage is a loan against the value of your home and can be taken either as a lump sum, a monthly income, or both. No capital or interest repayments are made until the property is sold. Instead, the interest is rolled up and added to the total amount of the loan.
Some Lifetime Mortgage providers allow you to take the capital in stages, which is called ‘drawdown’. The main benefit of a ‘drawdown’ facility is the interest. This only becomes payable when you actually take the capital; with interest growing slowly so the total debt builds at a slower pace as well.
Although there is no guarantee that property values will rise in the future, any rises in property value will offset the effect of the rolled-up interest on the loan.
A Home Reversion scheme is when you sell all or part of the equity in your home to a specialist reversion company.
You may not receive the full market value of your home, as the reversion company gives you the right to live in your home rent free for the rest of your life. However, now there are reversion companies that will allow you to draw the maximum share for your age and property value for a percentage share in your property.
When the property is sold, usually after death, the reversion company receives its share of proceeds from the sale.
So, for example, if you sold a 50% share of your home, the reversion company receives 50% of the proceeds when it’s sold.
A retirement interest only mortgage (RIO) is a mortgage that requires you to make regular monthly interest payments. It is only available to people over the age of 55 and has been designed to help older borrowers who may struggle to get a standard residential mortgage.
Unlike lifetime mortgages which are based on age, these plans are based on affordability into retirement.
With a RIO, there is no set end date and instead you only repay the capital when you sell your property, move into full-time care or pass away.
If you have good retirement income, you may be able to borrow more than with a lifetime mortgage.
A downside is that there is no flexibility in repayments and there may be less chance of you releasing further funds at a later date.
Over 55 equity release schemes are provided by well-known, major financial institutions, which are subject to industry regulations. If you’re unhappy with the service you receive, the Financial Ombudsman Service offers a free complaints service
All advisers recommending over 55 equity release schemes have to be suitably qualified, holding a London Institute of Banking and Finance Certificate in Regulated Equity Release (CeRER) or a Chartered Insurance Institute (CII ER), both FCA approved qualifications.
In addition, advisers who voluntarily join the Equity Release Council must abide by a strict code of conduct designed to protect equity release over 55 plan holders.
If you meet the following criteria, you normally qualify for equity release schemes:
If you’re not sure if you qualify, get in touch and we’ll be happy to advise you.
Neither your income nor your health will affect whether you qualify for an over 55 equity release scheme.
In fact, you can use equity, released from your home, to supplement your income to help you pay regular bills, or to pay for a medical operation or ongoing in-home domiciliary or nursing care.The amount you can release with an over 55 equity release scheme depends on your age and the value of your property.
You can use our Equity Release Calculator to find out how much money you could release from your property.
Alternatively, call us on 0800 0239155 or send us an email to info@55plus.co.uk and one of our expert equity release advisers will be more than happy to help.
Over 55 equity release schemes provide a tax-free sum.
What you use it for is up to you, but common reasons for releasing equity through lifetime mortgages and home reversion plans include:
Over 55 equity release schemes provide a tax-free sum.
Our promise to you is if we think equity release is not suitable for you we will always say so.
That’s why our advisers will first explore the following alternatives, including:
If you are in debt, you should get advice on how to manage the problem before even considering Equity Release. Contact your local Citizens Advice Bureau, or use their online advice service.
You can use our Equity Release Calculator to find out how much money you could release from your property.
Alternatively, call us on 0800 0239155 or send us an email to info@55plus.co.uk and one of our expert equity release advisers will be more than happy to help.
It depends on what sort of equity release scheme you opt for.
If you take out a Lifetime Mortgage plan, you remain the legal owner of your house.
If you take out a Home Reversion plan, you effectively sell an agreed portion of your house to the home reversion company.
You have responsibility for maintaining your property.
Our clients over 55 often ask us if it’s possible to make modifications to their home when an equity release plan has been entered into. From our experience, we understand that most providers will be happy for you to do so, but you may require their written consent beforehand.
Adding value to your home through making modifications, such as extensions, conservatories, installing a modern kitchen or bathroom and other major changes, will generally be seen as positive, as this will make your home more desirable and easier to sell in the future.
A detailed description of your planned modifications may need to be given, and your provider will decide whether to approve them or not. After all, the cash released from your home is yours to do with as you wish, so it seems perfectly feasible that you would want to improve your home to make your retirement as comfortable as possible.
If you have already released equity on your home, it is still possible to move home. All Equity Release Council members will allow you to move home whenever you wish. You must inform your lender before you do so. When you move, you may either repay the loan and interest in full, or alternatively you may be eligible to transfer the plan to your new property if it meets your provider’s criteria at that time.
If you move to a home of lower value than the property on which the plan was taken, you may have to repay a proportion of the loan and any interest. If your new home is of substantially lower value, you may be required to end the plan and repay the loan and any interest in full.
If you move to a house of greater value than the property on which the plan was taken, you may have the option of releasing a further capital sum.
With a lifetime mortgage, you have the right to remain in your home until you die or move into long-term care — providing you do not break the terms of the agreement.
The answer is yes. Lenders will allow you to make interest payments, just like a standard mortgage.
If you pay all the interest, your total debt will remain the same. It also doesn’t have to be you who makes the payments; if you take out an equity release scheme to help your children or grandchildren onto the property ladder, they could make the payments so that their inheritance doesn’t reduce further.
Some lenders will also allow you to repay up to 10% to 15% including interest each year of the initial amount borrowed with no early repayment charges.
There are a number of plans that may allow you to release more equity in the future, but the availability of further releases will depend on criteria and conditions that apply at the time.
If you think you might want more money in the future, you can take a drawdown facility, which enables you to take out your money in stages; interest only accrues on the equity that you have actually drawn down.
Alternatively, you can apply to the lender for a further advance.
Equity release for over 55s will not affect your state pension or any private pensions.
Over 55 equity release may affect any mean-tested benefits. Your 55Plus adviser will check this for you, but you are always advised to check your situation with your local tax/benefits office or council.
Under current legislation, any cash drawn through an equity release scheme will not attract Income Tax or Capital Gains Tax.
That depends on what type of over 55 equity release scheme you opt for.
If you take out a Lifetime Mortgage and your circumstances change, you may wish to repay your lifetime mortgage early. However, it’s worth remembering that these plans are intended to be long-term plans, and therefore your provider may charge an early redemption fee.
You cannot cancel a Home Reversion scheme once it has started.
With an over 55 equity release scheme you can make sure that you leave something to your loved ones.
With a Lifetime Mortgage, on your death (or second death for joint plans) the original loan plus interest must be repaid; anything remaining goes to the beneficiaries named in your Will. However, you can elect to ‘protect’ a percentage of the eventual sale of your home, ensuring a guaranteed inheritance is available.
Lifetime Mortgages that are offered by members of the Equity Release Council come with a ‘No Negative Equity’ guarantee, meaning your heirs will never be left owing the lender money once your home has been sold.
Selling the property, repaying the loan plus interest to the lender, would normally be done by the administrators of your estate; they would also make sure that any remaining amount is correctly apportioned to your named beneficiaries.
With a Lifetime Mortgage, if your heirs wish to the retain the property, they can normally do so if they repay the total amount owed to the lender within six to twelve months of your death.
With a Home Reversion plan, you sell an agreed percentage of your property to the home reversion company; when the property is eventually sold, the proceeds are split on the same percentages. For example, if you sold 40% of your home, the home reversion company would take 40% of the proceeds of the sale and your heirs would be awarded 60%.
It is not normally possible for your heirs to retain the property under a Home Reversion plan.
On your death (or second death for a joint plan), the loan and interest are due to be repaid. This is normally done by the administrators of your estate selling your property, repaying the debt out of the proceeds.
Your property will be sold and the proceeds allocated according to the percentage of your property that you relinquished.
If you sold 30% of it under your home reversion plan, the home reversion company will be entitled to 30% of the proceeds of the sale of your property, with the remaining 70% being made available to the beneficiaries of your estate.
We always recommend involving your family when you are considering an over 55 equity release scheme, so they understand the contract and what this means for their inheritance.
Generally, with a Lifetime Mortgage they are able to do so, providing they can pay off the total amount owed to the provider (original debt plus interest) within six to twelve months of your death.
With Home Reversion schemes, this is not normally possible.
With an over 55 equity release scheme you can make sure that you leave something to your loved ones.
With a Lifetime Mortgage, on your death (or second death for joint plans) the original loan plus interest must be repaid; anything remaining goes to the beneficiaries named in your Will. However, you can elect to ‘protect’ a percentage of the eventual sale of your home, ensuring a guaranteed inheritance is available.
Lifetime Mortgages that are offered by members of the Equity Release Council come with a ‘No Negative Equity’ guarantee, meaning your heirs will never be left owing the lender money once your home has been sold.
Selling the property, repaying the loan plus interest to the lender, would normally be done by the administrators of your estate; they would also make sure that any remaining amount is correctly apportioned to your named beneficiaries.
With a Lifetime Mortgage, if your heirs wish to the retain the property, they can normally do so if they repay the total amount owed to the lender within six to twelve months of your death.
With a Home Reversion plan, you sell an agreed percentage of your property to the home reversion company; when the property is eventually sold, the proceeds are split on the same percentages. For example, if you sold 40% of your home, the home reversion company would take 40% of the proceeds of the sale and your heirs would be awarded 60%.
The whole process usually takes between six to eight weeks from the time you sign the equity release application until you receive your money.
We do everything we can to make sure your application progresses smoothly – have a look at our testimonials page to see what our clients say about how we kept their applications on track.
Before you decide to apply for an equity release scheme, you need to have an initial and consultation with an adviser, so they can understand your circumstances to try and find the most suitable product for your needs, and a follow-up appointment for them to present their recommendations.
We make sure that after every consultation, you fully understand how Equity Release works and relates to your financial position. This enables you to make an informed decision and gives you the flexibility to decide in your own time.
You also need to allow time for discussing the options with trusted friends and family, to make sure you are confident in the decision you are making.
There are hundreds of equity release options on the market and the choice is growing all the time.
Many of these products are offered by household names; some are offered by less well known providers.
As independent later life lending specialists, this gives us the advantage of being able to look at the majority of lenders before advising on the plan that we think is most suitable for you.
All the plans that we offer are from members of the Equity Release Council, which come with No Negative Equity guarantee (subject to terms and conditions).
The Equity Release Council is an organisation dedicated entirely to the protection of over 55 equity release plan holders and the promotion of safe home income and equity release plans.
55Plus is a member of the Equity Release Council. Members of the Equity Release Council have to abide by a Code of Conduct that guarantees ethics and standards are met
They are required to:
Lenders who are members of the Equity Release Council have to guarantee that you cannot lose your home; provided you keep to the agreement terms, you will never be turned out of your home.
They also have to offer a ‘no negative equity’ guarantee, which means that you (or your heirs) will never owe more than the value of your property.
The majority of the mortgages written by 55Plus are provided by members of the Equity Release Council.
The Equity Release Council also provides a formal procedure for handling complaints
55Plus is a trading name of Mortgage Salad Ltd which is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under reference 566220.
We charge a fee for equity release advice. The precise amount depends upon your circumstances. The maximum fee will be £1,495 payable on completion. We will also be paid commission from the company that lends you money or buys your home.
Registered office: 12 Trinity Close, Tunbridge Wells, TN2 3QP.Registered in England and Wales No. 5941708