Equity Release - What to Consider

News at Jones Robinson | 16/03/2023

An introduction to lifetime mortgages 

Our associated mortgage brokers, Firstxtra Financial Services, professional advisers for mortgages and other financial services, recently released a series of materials looking at lifetime mortgages, a type of equity release that could allow you to release tax-free cash. As Firstxtra has explored, the potential savings this type of loan can unlock can be very impactful. 

A lifetime mortgage gives homeowners aged 55 and over the opportunity to borrow money against the value of their property. This can be done while the homeowner is still living in, or retaining ownership of, their property. The money can be borrowed as a lump sum or as a series of payments and there is nothing to repay until passing away or moving permanently into long term care. 

When the borrower passes away or moves into long-term care, the property is then sold and the money from this sale is used to pay off the remaining loan, with any profit on the home becoming part of the estate. Although you can choose to make repayments whilst living if you want to. You may also be able to remortgage your plan to release more money or secure a lower interest rate.

Huge benefits and potential savings 

As Firstxtra have outlined, there are a number of benefits to considering a lifetime mortgage. The financial company Key are specialists in later life finance focusing solely on the over 55s, and in their market monitor for quarter 3 of 2022, their customers unlocked an average of more than £114,000 from their property wealth, tax-free, through equity release - which can be used to give money to loved ones, clear existing debts or repay existing mortgages. Examples of the net savings you could make through repayments on a £50,000 lifetime mortgage after 15 years are: 

  • No repayments: Net savings of £0
  • Repaying £100 a month: Net savings of £8,371
  • Repaying £200 a month: Net savings of £19,828
  • Repaying £256 a month: Savings of £26,243

The above is based on a 65-year-old couple releasing £50,000 from their £296,000 property with a fixed interest rate of 6.15%.

Key things to consider 

Firstxtra believes the key areas that anyone considering a lifetime mortgage must consider are: 

  • A lifetime mortgage is typically repaid through the sale of your property when you, or the last remaining applicant, either passes away or moves into long-term care.
  • Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.
  • With a lifetime mortgage, there are typically no monthly repayments to make, as the loan, plus roll-up interest, is repaid when the plan comes to an end.
  • If you’re considering switching your plan, your adviser will take into account any early repayment charges you may need to consider
  • Equity release may involve a lifetime mortgage which is a loan secured against your home.
  • You should always think carefully when securing a loan against your property.

Most importantly… talk to an expert 

A lifetime mortgage is the most popular form of equity release and it is clear that there are a number of reasons for this, not least the savings and capital this type of mortgage can release. As the last bullet point above states though, you should always think carefully when securing a loan against your property. Talk to expert advisors as early as possible to get tailored advice for your specific situation. Everyone’s circumstances are unique, and as such, the route forward for each individual should also be bespoke. If you'd like specialist advise do call your local Jones Robinson office and we will put you in touch with an expert!

About Jones Robinson 

As leading, local estate agents in Newbury, Didcot, Lambourn & Hungerford, Marlborough and Devizes, and the surrounding areas, we are best placed to help you sell or let your property and of course to help you find your next home, whether you're buying or renting.

By offering a personalised service we can tailor the sale and timeline to your requirements as we don’t believe the ‘one size fits all’ approach works in this Industry.

The way we work is very transparent with a clear sales process, so you know what to expect. This is especially useful if this is your first time selling a house.

Contact us today to find out how we can help you sell your home, and for advice and guidance on the local area. 

About Firstxtra 

Firstxtra Financial Services is a long-established, successful, family-owned business with professional advisers covering the UK with the head office in Newbury, Berkshire.

Firstxtra has been trading for over 20 years with a team of highly skilled and enthusiastic professional advisers and administrators who specialise in mortgages and protection insurance.

Their philosophy is to provide the highest level of customer service and advice to all clients. The team at Firstxtra is very proud of its advice and service and this is reflected in the number of repeat customers they have, and from the number of customer recommendations and testimonials received on a regular basis.