Equity release could be a way to release some of the tax-free funds that are tied up in your home, without the hassle of having to move. However, it's important to know that equity release is a long-term financial decision, so before you commit to anything, it’s vital that all your questions have been answered.
If you want to know if equity release is the most suitable option for you or what interest rates are available on lifetime mortgages, allow us to help. We pride ourselves on our reliable, transparent advice, and are always here to help you understand equity release and what it entails.
ⓘ This is a lifetime commitment - check the benefits and drawbacks before you go ahead.
What are the interest rates with equity release?
When you have been carrying out your research, we’re sure you have questioned what interest rates are available. Naturally, the answer to this is completely dependent on which plan is the most appropriate to meet your financial needs. Compound interest accrues on lifetime mortgages but no interest is charged on a home reversion plan.
Lifetime mortgage
If you are a homeowner aged 55 or over, you might decide that a lifetime mortgage is the type of plan you would choose. A lifetime mortgage, which is a loan secured against your property, will allow you to release some of the equity tied up in your property. This type of plan allows you to retain the ownership of your home. This will allow you to release some of the money that is tied up in your property, while still retaining full ownership.
Some lifetime mortgages allow you to pay some or all of the interest, however 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. The interest rates on most plans can also be fixed for life, your adviser will go through these features with you in your appointment.
Home reversion
If you’re 65 or over, another way to release cash from your home is to sell all or a percentage of your property's value to a reversion company. In return, you’ll receive a tax-free lump sum.
The amount you receive will depend on your age, the value of the property and the percentage that you sell. It’s also important to note that you will not receive the full market value for your home, and you will not retain legal ownership of your home. You can remain in your home rent free for as long as you wish. Whilst you will no longer be the legal owner of your home, you can choose to live in it rent free for as long as you wish.
With this type of equity release plan, there are no monthly repayments to make or interest accruing. At the end of the plan – when your house is sold – the reversion company will take their percentage of the proceeds and the remainder will be left to your estate, if you did not sell 100% of your property.
