An equity release plan allows a homeowner to extract some of the value, or equity, bound up in their property. This kind of loan is offered to people over the age of 55 who may be planning for retirement and need some extra money as they no longer are earning regular money. The money drawn from an equity release scheme can be used at the homeowner’s discretion, and can be provided either as a maximum lump sum or through a series of instalments. When the house is sold as a result of your death or you moving into a care facility, the lending company will be entitled to the portion of the value that was loaned out, with interest.
What Can I Borrow on a Lifetime Mortgage Scheme?
A lifetime mortgage scheme is the most popular form of equity release. The amount of money you can borrow and get in a maximum lump sum or through instalments largely depends on the value of your property as well as your age. If you have a shorter life expectancy, this means that equity release companies will have their money returned to them sooner; so older people can get larger amounts of money. A shorter loan period also means that there is less danger of the loan amount and interest exceeding the value of the property over time.
Although all lifetime mortgage providers are different and offer varied plans, they usually won’t offer you more than 50% of the house’s value as your loan amount. This is a high estimate, however, and most companies will offer you an amount between 30% and 40% of the value of your property as a maximum lump sum or regular payment. This figure may rise over time as you age.
To calculate how much money you are likely to get from a lifetime mortgage scheme you can use one of the numerous Equity Release Calculators that can be found online or you can consult your financial advisor. The amount you can borrow and take out as a maximum lump sum is based on a simple formula that takes your property value and age into account.
