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1st UK takes the guesswork out of releasing equity from your home. We compare the whole of market, scrutinise the fine print and advise on all possible methods of releasing equity from your home – not just lifetime mortgages. Find out how much we can help you raise to fund your retirement – or anything else you need cash for.
If Equity Release is a Good Idea, Why Are No Banks Offering it?
The most successful, and today’s best equity release companies are specialist in retirement services. Household names like Legal & General and Aviva offer various equity release products specifically tailored to the over 55 age group.
The vast majority of lenders offering equity release products are voluntary members of the Equity Release Council. Back when HSBC piloted the HSBC Equity Advance Scheme, the ERC went by the name SHIP, an acronym for Safe Home Income Plans. That’s since been rebranded to the Equity Release Council and isn’t just about taking equity from your home to fund your retirement. The funds released through equity release can be used for any purpose including investing, which many secured homeowner loans do not permit.
The overarching purpose of equity release is to give older homeowners access to the equity they’ve accumulated in property wealth over the years. Some places will emphasise that equity release is for the cash-poor and property rich. That, it can be, but it is different for everyone.
What is universally agreed is that equity release is not for everyone. It’s a huge decision that cannot be taken lightly as it affects the financial future of your loved ones. Chances are, your property is the most significant asset you have. If not, it’s going to represent a sizeable proportion of any investment portfolio.
The reason equity release can be tricky with financial planning when inheritance is involved is because interest is compounded, added to the capital of the loan and continues accruing until you and your partner die, which is when the home is sold. When that happens, the lender is repaid the loan capital plus interest.
All reputable lenders who are members of the ERC will provide a No Negative Equity Guarantee, ensuring there’s no debt left to your beneficiaries.
For those who do plan to use equity release to fund retirement, one way to limit the potential for sky-rocketing interest increases, inflating the amount owed, is to take smaller sums instead of an initial lump sum payment representing a sizeable portion of your home equity.
The HSBC Equity Release Scheme was piloted in 2006, around the same time Halifax and RBS made a push into the equity release market.
Like most high street banks, HSBC did not offer the product directly. It was a partnership with In Retirement Services and was part of a tied deal with HSBC, therefore, regarding the advice offered; it was only advice tailored explicitly to the HSBC Equity Advance Scheme. Not what was available from the many reputable and far more specialist equity release companies.
Nowadays, things are much different, and it’s more difficult for banks to offer equity release products as part of retirement planning. All equity release products are regulated by the Financial Conduct Authority and cannot be bought directly from any lender. A specialist retirement services financial advisor should be consulted with as part of your retirement planning.
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The Two Ways To Release Equity For Retirement
- In one lump sum payment (most expensive option)
- In multiple partial payments
To fund your retirement years using equity release, it’s possible to limit your exposure from eye-watering interest charges. The minimum you can borrow through equity release is (usually) £10,000. However, you do not have to take that as a lump sum. You can choose to receive just some of that as an initial payment, say, £2,000. The interest rate the equity release provider offers you would be charged on the funds released; not what you leave on reserve.
According to figures released by the Equity Release Council in 2018, the average interest rate on Lifetime Mortgages was 5.22%. However, as the market is still growing, competition is causing rates to decrease. If you look at the comparison page of Money.co.uk for Lifetime Mortgages, you’ll see rates below the 4% mark with LTV (loan to value) ranging from 30% to 45%.
Those are only for some of the more popular equity release firms. There are other specialist lenders such as Hodge Lifetime offering up to 50% LTV with competitive terms and rates.
Comparison sites can only give you a glimpse of what’s on offer as all lifetime mortgages are only available through intermediaries. The vast majority of lenders won’t advertise these products publicly as the information is only of use to financial advisors able to help consumers find the most suitable product.
At 1st UK, we’re wholly independent, and we can run a whole of market comparison to bring you a detailed breakdown of what’s available from all equity release companies and advise on the most suitable, which is only if equity release is suitable to your situation.
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How 1st UK Can Help You Release Money Tied Up in Your House
No matter what your plans are for retirement, our advisors can discuss all the ways you can release equity from your home. Lifetime mortgages are only one avenue to consider.
With a lifetime mortgage, you can release funds tied up in your home to spend as you wish in your retirement years, making life more comfortable. For those nearing retirement, between the ages of 55 and 67, it may be that you have an interest-only mortgage, for which there could be a shortfall.
If you are using equity release to repay an existing mortgage, there may be early payment fees charged by the lender. If that is the case, our advisors can work with you to tally the total cost of repaying an existing mortgage, how much you’d need to borrow based on the value of your home and your age, and give you a ballpark figure of what you could be agreeing to pay over the term of your loan.
As the name of a lifetime mortgage implies, once in place, it remains there for the rest of your life, continually accruing interest. None of the interest is payable by you, as it’s repaid from your estate. However, some providers do allow for partial payments to be made towards a lifetime mortgage, helping older borrowers leave more behind by taking financial control over the interest charged.
The options to repay anything toward a lifetime mortgage are entirely optional and not a requirement; therefore, there’s not any obligation to make continuous interest payments for the rest of your life. You can do so if you choose.
In all cases, 1st UK will only compare the most reputable equity release companies able to provide reliable financial solutions with the full backing of a No Negative Equity Guarantee.
As well as the added protection of the Right of Tenure, which ensures on joint lifetime mortgages, the surviving partner is guaranteed to be able to live in the property as the lender will not be able to force a sale.
If you’re over 55 years of age and interested in unlocking at least £10,000 from your home equity, talk to our advisors at 1st UK to find out the most financially sensible method of borrowing that’s right for you and your family.
Please note that the HSBC logo is a trademark of the HSBC Group, to which we have no direct affiliation. The equity release firms we work with provide quotes from many providers.
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