What is the best way to release equity from a house?
When you are looking to access money through the value of your home, this is known as ‘equity release’. However, there is no single ‘best’ way to release equity from a house, as everyone’s circumstances are different. At Warwickshire Mortgages, we’ve shared some guidance on your options. We only advise on lifetime mortgages, not home reversion plans.
What are the different types of equity release?
There are different ways to raise funds thought the value of your home, including selling and downsizing, and then using the sales profits.
If you’re over 55, there are lending options available that allow you to release the equity you’ve built up in your property value. Common reasons include paying off debt, gifting money to family, home improvements, paying off an interest-only mortgage or to boost retirement income. The released equity might be one lump sum or in smaller amounts.
One way to release equity is to consider a lifetime mortgage. This is an equity release scheme taken against your property, where you do not have to make monthly repayments. The amount released will reduce the equity left in your home and this can also affect your family’s inheritance.
Another option could be to get a home reversion plan, where 25-100% of your home is sold to a lender often below market value. This would be in exchange of an agreed lump sum or a regular income payment for life with a peppercorn rent. However, home reversion plans come with risks. At Warwickshire Mortgages, we don’t advise on home reversion plans, but we can recommend you to a third-party specialist if you want to consider this option.
There are also options for later life lending if you want to extend your mortgage term using your retirement income or retirement interest only mortgages.
What is a lifetime mortgage?
A lifetime mortgage is different from a traditional mortgage. The loan is secured against the property, and interest payments can be flexible. You can pay some of the interest each month or let it roll up and the accrued interest is then paid at the end of the term. This might be when you pass away or go into a long-term care setting.
Your age (you must be over 55), your medical history, the value of your home and its location will be considered in terms of how much you can borrow. You can also choose from different types of lifetime mortgages with varying features.
For more guidance, see our Later Life Lending and Equity Release page.
Lifetime mortgage advice in Warwickshire
As there are risks associated with any equity release scheme, e.g. reduced equity available for beneficiaries and the potential impact on means-tested benefits, you should check if it’s the right solution for your situation. Always speak to a qualified mortgage adviser, so you understand the potential impact on your finances and your estate.
At Warwickshire Mortgages, we get to know you and your circumstances, so we can advise you on the most suitable mortgage for you and your family. Our friendly team are here to support you throughout the whole process.
For trusted advice on lifetime mortgages, book a free, no-obligation chat with our expert team.