Independent Advisers for Mortgages, Insurance and Equity Release.
Advisers for Will Writing and Estate Planning.
WGM Financial is a trading name of William Glen Malcolm which is authorised and regulated by the Financial Conduct Authority (FCA).
FCA Reg No 512102.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.
Equity released from your home will be secured against it.
A lifetime mortgage will be secured against your home.
Wills and Estate Planning arranged on behalf of APS Legal & Associates Ltd.
APS Ltd Head office: Worksop Turbine Innovation Centre, Shireoaks Triangle Business Park, Coach Close, Worksop, Nottinghamshire, S81 8AP.
APS Legal & Associates is a member of the Institute of Professional Willwriters.
APS Legal & Associates complies with the Trading Standards Institute Approved IPW Code of Practice.
Estate Planning and the provision of Wills are NOT regulated by the Financial Conduct Authority.
How Lifetime Mortgages Work.
A lifetime mortgage is like any mortgage but the lender bases the amount of borrowing on the value of the property rather than ability to pay. You borrow a pre-determined percentage of your property value dependant on age of the youngest applicant. This amount may vary between lenders. Interest is rolled up and added to the loan throughout the term and no monthly repayments are required.
The loan is not payable until the death of the last surviving applicant, or when the property ceases to be the main residence, for example, the last surviving applicant moves into long term care. Interest is added to the mortgage and the amount you owe will increase over the term of the mortgage.
How Home Reversion Plans Work.
The Reversion Company will give you a pre-determined amount in exchange for some, or all, of the ownership of your property. A home reversion plan is not a mortgage. You are selling your property (or part of it) and the lump sum you receive is usually less than the market value. The amount you receive may vary between providers. You will have a lifetime tenancy and may be charged a small notional "peppercorn" rent.
The property is not sold until the death of the last surviving applicant, or when the property ceases to be the main residence, for example, the last surviving applicant moves into long term care. There is no interest being added or rolled up because a reversion plan is not a mortgage.
Things to Consider
The main objections and cause for concern with equity release are the emotional attachment to the property and therefore reluctance to sell it (or part of it) or have an increasing debt on it. Many people do not like the idea of selling part of their property and therefore do not consider Home Reversion Plans at all. Similarly, many do not like the idea of interest being rolled up with a Lifetime Mortgage and an increasing debt being charged to the estate.
A good point on Home Reversion schemes is that they can sometimesoffer equity protection. If a client sells, say, 50% of their property then the other 50% is available for the beneficiaries of the estate (in most cases). However, they are likely to receive a lump sum that is far less than the market value with the reversion company still holding an interest as their 50% share increases in value over the years. In general, the reversion plan lump sum is generally a lot more than would be received from a Lifetime Mortgage.
Lifetime Mortgages obviously have the mounting debt but are easier to understand and do not have the emotional factor of “selling the family home.” While it is impossible to give an accurate picture of how the rolled up interest will affect the estate, because this depends on property value, age of client, future house price growth and how long they will have the product for, it is normally the case that the client would need to be well past their 100th birthday before they approach negative equity. (And of course there will be a no negative equity guarantee). The actual Key Facts Illustration will show an example of the debt increasing.
Contact Us to discuss further or if you would like some more information or advice.
Types of equity release
There are two main types of equity release scheme: