Mortgage Guide

Equity Release

If you need a lump sum of money, for example to help your children buy a first home then equity release is a scheme that will theoretically deliver your child's inheritance early. It could help them get on the first rung of the property ladder, a significant deposit helping reduce the size of the mortgage they might need.

The most popular type of equity release is a lifetime mortgage. This is when you take out a loan against a certain percentage of your property (up to 50 per cent depending on your age), which you can choose to receive as a lump sum.

The interest on the loan, which is usually fixed and at a higher rate than on a standard mortgage, accumulates over the equity releasers lifetime. No repayments are due when you are alive. Instead the loan is repaid on your death after which time the house must be sold, typically within a year. All schemes regulated by industry body, carry a no negative equity guarantee i.e. you will never owe more than the value of your home.

However, even if you took a lifetime mortgage on just 25 per cent of your home, this still means that your beneficiaries could be left with nothing if you go on to live a long time. Variations to the above scheme are available which allow you to make regular interest only payments on the liability, thereby potentially negating the negative impact of compound interest accumulation.

The other form of equity release, home reversion plans, involve selling a proportion of your property to a finance provider, usually at a discount to the market value. Upon death or sale of the property the finance provider takes a proportionate sum representing their percentage share of the property.

However, they are not as popular as lifetime mortgages due to current low interest rates. If considering a lifetime mortgage as a method of raising capital it is important to note that they are not appropriate for everyone and will not be suitable in all situations. Should you be contemplating equity release you should consider discussing it with potential estate beneficiaries and also check any impact on state benefit entitlement.

This is quite a complex area and it is important to take equity release advice.

Other mortgage guides and useful pages:

Mortgage Comparison - First Time Buyer Mortgages - About First Time Buyer Mortgage Advice - First Time Buyer Mortgage Brokers - Buy to Let Mortgages for First Time Buyers - Remortgages for First Time Buyers - Shared Ownership Mortgages - Help with Mortgages for First Time Buyers - Mortgages for Parents of First Time Buyers - Shared Appreciation Mortgages - Shared Equity Mortgages  -Joint Mortgages - Financial Advice for First Time Buyers - Overseas Mortgages for First Time Buyers - Request First Time Buyer Mortgage Advice - Find your First Property - New-Build Gifted Deposit Deals - Best First Mortgages Comparison Table

Features, advantages and disavantages of specific first time buyer mortgages:

100% Mortgages l Cashback Mortgages l High LTV Mortgages l Graduate Mortgages l Professional Mortgages l Mortgages with Parents l Guarantor Mortgages l Family Offset Mortgages l Mortgages with Friends or Family l Mortgages at University l Rent a Room Mortgages l Affordable Mortgages l Interest only Mortgages l Part Repayment Part Interest Mortgages l Interest-free Start Mortgages l Shared Ownership Mortgages l Poor, Adverse or Poor Credit Mortgages l Key Worker Mortgages l Shared Equity Mortgages

Useful websites:

www.ship-ltd.org