Tag Archives: Release Equity

How Can the Proceeds from Equity Release Schemes Be Spent?

How Can the Proceeds from Equity Release Schemes Be Spent?

There are two main reasons why equity has caught on and become increasingly popular in the past few years. Firstly, it allows homeowners to access the cash value of their asset without having to sell it or move out, and secondly, there are no constraints placed by equity release providers on how the money can be spent.

Different people have different reasons for wanting to release equity from their home. Most equity release schemes allow for release either options in the form of a single lump sum or as regular withdrawals from a drawdown facility which can then be utilised as an income. This makes it a flexible option for people with a variety of needs, whether it is someone who needs cash for funding a holiday or someone who needs a supplementary income during retirement.

Having said that, it is important to note that there are some things outlined in the equity release plan contract that one cannot do, for instance make major alterations to the property that could have a significant impact on its value etc. Also, should anyone else move into the property, then the lender needs informing. The lender with then require an equity release waiver form must be signed by the new occupant so as to waive their rights behind the lenders, in case the main party died in the meantime.

In such situations it is always advisable to check with the lender beforehand to gain acceptance of the plans, otherwise should the lender find out any other way you could be in breach of the equity release terms and conditions.

Check the alternatives

Equity release is a flexible tool that allows people to use the released money to meet their individual goals. The key factor in deciding whether one needs to release equity from their property to meet these goals is whether there are other options that could help you achieve the same aims. Therefore, it is the duty of the lifetime mortgage adviser to consider all the alternative solutions that may exist before proceeding with any recommendation for an equity release scheme.

Once these alternatives have been eliminated it is only then that your lifetime mortgage financial adviser can then help you understand if equity release is the best way for you to meet your needs and attain your goals. Discussing your goals with your adviser can also help you understand if there could be another better way to achieve the same thing without incurring the same risks.

For instance, has your adviser consider ALL of the following: –

  • Would you be better off downsizing to a smaller property instead of releasing equity?
  • Could you use any existing savings or investments before taking any release of equity?
  • Be eligible for any means tested benefits that could help you?
  • Ask your children or relatives for financial assistance?
  • If home improvements are planned, are there any grants available that could cover the costs?
  • Consider other types of finance such as personal loans, credit cards, hire purchase, interest only mortgage?
  • Take in a lodger which could provide a source of extra income?
  • Reduce one’s expenses to provide additional disposable income?

A financial adviser could help you explore all the possible options and find the optimum solution.

For those who find that equity release is the best option for them, there are many ways in which the released equity can be used and there are no constraints on how the money can be spent. As mentioned above, everyone has their individual reasons for releasing equity, but some popular uses for released equity include a cash gift to the kids or grandchildren, funding a holiday, home improvement works, a new car, repaying an existing mortgage or debt consolidation or even buying a second property such as a holiday home.

Equity release schemes provide the freedom to carry out your long-term desires, something that wouldn’t have otherwise have been possible. However, there is always a word of caution which is that equity release schemes are not suitable for everyone & do come with a health warning – it will reduce your inheritance!

 

Will an Equity Release or Interest Only Lifetime Mortgage Calculator Provide the Biggest Lump Sum?

Will an Equity Release or Interest Only Lifetime Mortgage Calculator Provide the Biggest Lump Sum?

Experience shows that when it comes to finding out which scheme offers the maximum equity release, confusion reigns over whether it’s the roll-up equity release plan or an interest only lifetime mortgage. With equity release schemes becoming very popular in recent years, more people than ever are conducting their own research before approaching an equity release broker to implement their plans.

Roll-up and interest only lifetime mortgages give homeowners the option of releasing some of the equity tied up into their property, without the need to sell the home and move out. The cost of living during retirement is on the rise, and with shrinking pension funds, poor annuity rates and increasing costs for care, many retirees are looking for flexible ways to optimise their financial assets. There are many different equity release plans available today, and which equity release mortgage suits you will depend on what exactly you need.

For instance, someone may need an extra cash injection for a one-off expense, while someone else may need a regular income to supplement their retirement income. Someone may want to release equity while also protecting some of the equity for their beneficiaries, while someone else may find it more important to understand what is the maximum equity release cash lump sum? Which equity release plan works for you will therefore depend on what it is you need and one of the ways of establishing this is with the use of equity release calculators.

If you need to release a maximum equity release lump sum from your property, roll-up equity release plans generally come out on top, when compared with interest only lifetime mortgages. While the exact terms of the plan depend on which equity release plan you look at, generally speaking roll up equity release plans can afford to allow for a bigger lump sum release than interest only mortgages, and you can see this by checking with different equity release calculators.

Stonehaven enters the maximum calculation

One exception to this would be the Stonehaven Interest Select Max Plan, which allows for maximum borrowing. Stonehaven’s Interest Select plans offer a viable alternative to roll up type equity release schemes, in which equity release can either be done on an interest only or roll-up basis. Any interest repayments are considered to be contributions towards the repayments, so you are free to pay as much or as little as you wish each month. It is also possible to stop payments altogether and convert the plan into a roll up equity release plan. This is a great safety net for those who require security of tenure and peace of mind.

The Stonehaven Interest Select Max option allows for the maximum lump sum release, at a fixed interest rate for the entire length of the plan. For instance, for a male applicant aged 65 years, with a property valuation of £200,000, with the maximum select option, you could release as much as 29% of the property value. This works out to £58,000, which is comparable to if not higher than some roll up equity release plans. However, this still doesn’t result in the maximum equity release.

Absolute maximum enhanced calculation

A recent innovation in the field of lifetime mortgages is the enhanced lifetime mortgage plan. Effectively using health as a factor influencing the loan-to-value, equity release underwriters will gather information on one’s health and lifestyle via a questionnaire. How severe the health of the individual(s) is will affect the size of the maximum lump sum. Therefore, someone who is overweight, a smoker, maybe suffered a heart attack, diabetes or cancer could find their health has actually helped them attain a bigger lump sum. Therefore, to get an accurate idea of the maximum lump sum ensure you have access to an enhanced lifetime mortgage calculator aswell as the standard devices.

Which equity release scheme allows you to release maximum equity depends on your individual circumstances, including age, property valuation and now health. Enhanced lifetime mortgage plans will usually offer the greatest lump sum, but on certain occasions, Stonehaven’s Interest Select Max option can prove to be a more viable alternative should you have the disposable income to make monthly payments and thereby protecting your next generation’s inheritance.