Worried about paying your mortgage? We have various ways that we can help you.
Equity release is a way to turn some of your home’s value into cash. Releasing equity effectively swaps a percentage of your property value for a lump-sum or in smaller amounts over a period of time you can spend as you wish. Many people use equity release to raise funds for one-off events, like preparing for retirement, putting a deposit on another property or financing an expensive family event, like a wedding.
There are several choices available when it comes to deciding how to release equity.
The most common option is called a lifetime mortgage.
A lifetime mortgage is generally available to homeowners over the age of 55. You don’t have to have paid off your existing mortgage and you won't have to move out of your home. The process works in a similar way to other loans. You’ll effectively borrow money against the value of your property.
The loan does not have to paid back immediately it is repaid only when you or the last named borrower in the house passes away or moves into long-term care. Any interest builds up over time and is included in the final payment. Though, you can choose to make repayments if you wish.
You’ll also need to meet the criteria to qualify for a lifetime mortgage.
You can use our eligibility checker to find out if you qualify for our Scottish Widows Lifetime Mortgage.
The second option is called a home reversion plan. With this scheme, you’ll sell a portion of your home to the reversion company in exchange for money. You won’t have to move out, but the reversion company receives their share when you eventually sell your house.
The percentage of your property you can sell to the reversion company depends on your age and the house’s value.
As with a lifetime mortgage, there is set criteria you must meet to be eligible for a home reversion scheme.
How you use your tax-free cash is up to you. You can choose to receive it as a lump-sum, though some prefer to take smaller amounts over time.
People free up equity for a variety of reasons, such as:
Equity release can be a great option if you need to access a large sum of cash relatively quickly. However, it only makes sense if you own a large portion of your home already. You can do this by successfully paying off your mortgage over several years.
Even still, there are costs that may come with releasing equity that you should be aware of.
Some providers, like Scottish Widows Bank, offer free advice and free valuations which can help you reduce costs.
You may be if:
Find out if you’re eligible by using our eligibility checker.
Equity release is safe if you choose a provider that is regulated by the Financial Conduct Authority (FCA) and follows standards set by the Equity Release Council (ERC).
As with any financial decision, there are advantages and disadvantages to releasing equity, depending on your own individual circumstances.
If you’re wondering if a lifetime mortgage could help you, it’s important to consider the advantages and disadvantages. Some examples of these are detailed below but your adviser will always discuss your needs and circumstances to decide if a lifetime mortgage is right for you.