Equity Release Mortgages

Equity Release describes how existing homeowners can turn some of the equity in their property into cash.

Equity Release is a method of releasing capital from a property. Some borrowers have been able to release equity in their property by way of an interest only mortgage where they have only paid the interest back to the lender each month without any capital.  Although there are still lenders that will allow Interest Only mortgages, these mortgages come with a number of restrictions and their availability has been severely reduced since 2008.

There are 2 types of equity release mortgages – Lifetime Mortgages and Home Reversions.

Excel Financial Services only deals with and arranges Lifetime Mortgages.  Jane Bottomley is appropriately qualified to advise upon Lifetime Mortgages which is a requirement of the Financial Conduct Authority.

A lifetime mortgage is one where a lender allows a specified level of equity release based upon the property value and a borrowers current age (or in the case of a couple, the age of the youngest borrower).  The minimum age for an applicant in the current marketplace is 55.  There is no requirement for any payments to be made to the lender and the interest charged for the borrowing is rolled up and added to the mortgage debt.

The lenders in this market have tried to distinguish themselves from one another by applying different terms and conditions to their products and developments have included the gradual drawdown of equity, being able to reduce the borrowing level later should it be beneficial and enhanced levels of borrowing due to applicants’ health status.

Excel Financial Services only deals with Safe Home Income Plan (SHIP) lenders which means that if a borrower was faced with a negative equity situation, the lender guarantees not to take possession of the borrowers’ property.  This is because lifetime mortgages are underwritten on an actuarial basis.