How Does Equity Release Work?
‘How does Equity Release work?’ is probably the most frequent question we are asked by potential new clients. We are delighted to receive these queries as we are specialists in all types of Later Life Lending. Our aim is to ensure that if you come to us with an enquiry, you leave knowing more than you did before we spoke.
Equity Release is the overall term that describes the three types of lending for the over 55s: Residential Mortgages, Retirement Interest Only mortgages (RiOs) and Equity Release.
There are then two types of Equity Release Mortgages (which make up over 99.5% of the Equity Release market) and Home Reversion Plans. We are able to advise on all of these products and will explore which of these options is best for you.
Many people have heard about Equity Release or Lifetime mortgages, but do not know enough information about it to make an informed decision on whether it is suitable for them so still ask us How does Equity Release work? Very often they have heard about the older types of Equity Release products from the early 2000s, which did not have the features or flexibility of more modern products and often had much higher interest rates.
So how does Equity Release work? The basic premise of Equity Release is that if you own your home, your property has a value and providing you are aged over 55, you could be eligible to release some of the value of your property as a cash lump sum.
The cash that is released from your property can be taken as one lump sum, or a smaller amount taken at the start, and then other ‘drawdowns’ taken in the future.
You are able to pay all of the interest, part of the interest or allow the interest to ‘roll up’ ie be added to the amount you owe.
The most important step in the process is to find a qualified, experienced Equity Release Advisor to guide you through the process. The Equity Release Council’s (ERC) website will show you members in your area, and you can go to the member’s website to read the reviews that their previous clients have left them.
These are important steps to take as the ERC is the industry body that sets the standards, and the reviews will often show you how good the service offered by a particular firm is.
The process of obtaining an Equity Release mortgage takes around three months. The initial broker Fact Find, research and application take a few hours, usually over two or three conversations. After the application is completed, the next stage is for the lender to instruct the survey of your home. After the lender evaluates the survey and subject to satisfactory assessment, they will issue a mortgage offer.
The final stage of the process is for a specialist Equity Release solicitor to complete the conveyancing process. Once this is finished the requested funds are sent to your nominated bank account.
The overall process is complicated so finding a broker you can trust to guide you through it is an important aspect. This will ensure that rather than asking How does Equity Release work? you will be telling your friends and family how it works!
If you liked this post Equity Release and the Pandemic, check out our Blog for more great mortgage tips, news & advice.
Call 01752 749656 or CONTACT US for free impartial equity release mortgage advice to help you find the best deal.