Unlocking cash from your home

There are several ways of getting money from a property, from selling to renting out rooms in your main home or taking out equity release.

Selling normally means moving out of an often much-cherished family home and renting out means giving up part of your home to someone else. With equity release, the homeowners can remain in their home until they die or go into long-term care, subject to the terms and conditions of the equity release product.


What is equity release?

It’s a way for people aged 55 and over to unlock some cash from their home without having to move.

For most people, their home is the most valuable thing they own, so it could make sense to use it to raise some cash.

Equity release products don’t have a fixed term and customers can stay in their home until they die or go into long-term care, subject

to the terms and conditions of the equity release product. When this happens, the plan will end. For a couple taking out equity release, the plan ends when the second person dies, or both partners permanently go int o long-term care.

A lifetime mortgage is a form of equity release that allows you to access the equity tied up in your home. It is a long-term loan which is secured on your property.

Although it’s a mortgage, you don’t normally have to make any repayments. The loan is designed to be repaid, in full, usually from the sale of your property when you (and your partner for joint lifetime mortgages) die or move into long-term care, subject to the terms and conditions of the equity release product. You continue to own your property.

Why would you consider a lifetime mortgage?

Retirement should be an enjoyable time, however, this may not be the case if you’re worried about your finances.

Each applicant has their own reasons for taking cash from their home. Some of the reasons people release equity from their home could be:

  • Paying for home improvements
  • Debt consolidation
  • Help to pay everyday bill s
  • Helping friends and family
  • Going on holiday

If you’re considering a lifetime mortgage, you should talk to your family to tell them why. Whatever your reason may be, it’s important to discuss this with them as there will be a lifetime mortgage secured against your home which will need repaying either when you die or go int o long-term care.


How does a lifetime mortgage work?

It’s a long-term loan, secured on your home, but there are no monthly repayments. Instead, the interest builds up on the original loan and any interest added to it. This means that the amount you owe will quickly add up.

The loan and interest will be paid off when the property is sold after you die or move into long-term care, subject to our terms and

conditions. As the value of the loan and the interest increases over the

years, the amount of inheritance you can leave behind will fall.

It’s also important to note that taking a lifetime mortgage may affect your tax position and welfare benefits.


What if I would like to or need to move from  my  home?

If you move to a property which doesn’t meet our lending criteria, your lifetime mortgage would become repayable and you may need to pay an early repayment charge which could be a significant amount. However, you don’t have to leave your home until you die or move into long-term care. This applies to both people if it’s a joint plan.

If  you  or  your  family believe you are in need of long-term care we’ll conduct  an Activities  of  Daily  Living  assessment. This  will

demonstrate  to us your  capability of completing everyday tasks and caring   for  yourself.  The outcome of this assessment will determine whether you will  be  charged  an  early  repayment  charge  if  you leave your home.



Circumstances in which early repayment charges  don’t apply

As a lifetime mortgage is a long-term commitment, either until you die or you go into long-term care (subject to our terms and

conditions), you may find that your circumstances change over the time that you have it.

If you leave your home and repay your loan in full early, then there may be an early repayment charge to pay, which is likely to be significant. However, there are certain circumstances in which early repayment charges don’t apply:

  • If you repay within three years of the date that one of you has passed away or the date that you notify us that one of you needs long-term care, whichever is
  • Where all the borrowers have died or have moved into long-term care, subject to our terms and
  • You’re moving property and transferring your lifetime mortgage to the new property. If you move to a property that’s worth less than your current home you may be required to repay part of your loan and the interest you
  • You want to move and apply to transfer your lifetime mortgage to a new property that doesn’t meet our current lending If you’re eligible for downsizing protection you can repay the lifetime mortgage with no early repayment charge.
  • You want to sell part of your property and we’ve given you consent to do
  • You want someone to move into the property with you as a joint borrower and for your lifetime mortgage to be repayable when the last person dies or moves into long-term care, subject to

our terms and conditions. If the other joint borrower is younger than you, then you may be required to repay part of your lifetime mortgage.

  • Where you’re making voluntary partial repayments. For more information see your terms and
  • The value of yields on gilts will have an The gilt assigned to your lifetime mortgage will rise and fall with market conditions. The gilt yield at the time of early repayment determines whether or not there is a charge.
  • The gilt assigned to your lifetime mortgage has



What happens if my home sells for less than the amount owed?

Even if your home sells for less than the amount you owe, you or your estate will never have to repay more than the amount received from the sale of your home.

This is because every lifetime mortgage  we recommend comes with a no negative equity guarantee. This is on the basis that your home is sold at the best price reasonably obtainable.



Can I still  leave an inheritance when I die?

A lifetime mortgage will always reduce the amount of inheritance you can leave behind. However, you can choose

to safeguard a percentage of your home’s value to leave as an inheritance.

This is called an inheritance guarantee. It means that you can select a percentage of your home’s value to be paid to you or your loved ones if you move into long-term care or paid to your estate when you die, subject to our terms and conditions. The money will be paid when the house is sold for the best price reasonably obtainable.

Alt you have to do is tell us the percentage of your property value you want to guarantee. You can only do this when you apply for a lifetime mortgage, it can’t be added as an option once the loan is set up.

Selecting an inheritance guarantee will reduce the amount of money you can borrow.

It’s important to note that the inheritance guarantee may also affect the interest rate on your lifetime mortgage.



Lifetime Mortgages – The Benefits and things to consider

What are the benefits? Things to consider
•         A cash lump sum to enhance your retirement.

•         Continue to own and live in your home.

•         The possibility of releasing further cash in the future.

•         A ‘no negative equity’ guarantee.

•         Our optional inheritance guarantee ensures you can leave an inheritance to your family.

•         Our voluntary partial repayment feature lets you pay back some of the money you’ve borrowed each year. This is only available to clients who applied  for their lifetime mortgage on or after 28 April 2014. For more information see your terms and conditions.

•         A fixed rate of interest throughout the term of your mortgage.

•    A lifetime mortgage may not be suitable if you have savings that you could use instead, or if you want to sell all or part of your home or downsize.

•    Interest is added annually to the amount you’ve borrowed on a compound basis. This means the amount that you owe will increase quickly.

•    You will need to consider how you will pay any product related fees and/or other fees relating to your lifetime mortgage. For example solicitors fees.

•    You don’t have to pay tax on the amount you release. However, equity release may affect your tax position and your eligibility for certain welfare benefits. You’ll need to talk to your financial adviser about this, or visit gov.uk for more information on how this may affect you.

•    If you release equity from your home, you may not be able to rely on the value of your property in retirement or to fund long-term care. You may also not be able to borrow more money against your home in the future.

•    A lifetime mortgage is a lifetime commitment. If you choose to fully repay the plan early, you’ll have to repay the loan and the interest, and there may be early repayment charges of up to 25% of the loan value to pay.

•    The amount of inheritance you can leave will be reduced, possibly to nothing. However, you can choose to take our optional inheritance guarantee.

•    If you decide to leave, or have left the property permanently because you need

long-term care, or if you’re a joint borrower and both of you move into long-term care, then you will be required to repay your lifetime mortgage.

•    The amount available to borrow depends on a number of factors, including your age and the property’s value.


Can me or my family contact LG Embrey Financial Planning?

There may come a time when your relatives have questions for

us regarding Equity Release. Alternatively they may need to contact us to tell us that you’ve moved into long-term care or passed away.

It’s good for them to have your plan details to hand when they call, as we’ll need to ask them some questions for security purposes.

If they want to discuss specific details of your plan, we must have your written authority to deal with them on your behalf, or, if appropriate, a copy of the power of attorney document.

If you die we’ll need to make sure they are responsible for handling your estate. They can contact us.

Talk to us or another qualified financial adviser

We strongly recommend that you talk to us if you want to understand more about lifetime mortgages. We will be able to explain equity release to you thoroughly and answer any questions you may have.

We look at your overall financial situation and recommend the best course of action. A lifetime mortgage isn’t suitable for everyone and we will tell you if it’s right for you or not.

It’s important that you all understand how a lifetime mortgage works. It’s a big decision, so it’s a good idea to talk to your family about it.

For more information or to find out if you’re eligible for a lifetime mortgage call us on 01743 382 002 or email steve@lgembrey.co.uk