FAQs
Frequently Asked Questions
What types of equity release plans are there?
There are two types of equity release plans, home reversion and lifetime mortgages.
How does a lifetime mortgage work?
A lifetime mortgage is an equity release product that allows you to access some of the equity that’s tied up in your home. It’s a long-term loan that’s secured on your property.
Even though it’s a mortgage, you don’t have to make regular repayments. The loan and interest will be paid back in full, usually by selling your property.
You’re charged interest on the amount you borrow as well as on the interest that’s already been added, so what you owe back rises quite quickly. Taking out a lifetime mortgage reduces the value you have in your home and any inheritance you leave. Your tax position and any entitlement you have to welfare benefits could also be affected
Is equity release safe?
Equity release is regulated by the Financial Conduct Authority (FCA).
The FCA is an independent organisation and reports to the Government, helping to make sure the financial products offered to the public are fair and meet certain standards.
The Equity Release Council was set up in 1991 to help protect people taking out equity release.
How long does equity release take?
Legal and Financial Advice is required when taking out equity release, so the time it takes to finish your application can vary.
How does equity release affect benefits?
Taking out equity release (a lifetime mortgage) cuts down the value you have in your home and the amount of any inheritance you leave. Your tax position and any entitlement to welfare benefits you have could also be affected.
It might affect your entitlement to means-tested welfare benefits, like council tax benefit, pension credit, and certain health benefits.
How much can I release?
You can only release a certain percentage of the value of your home. This is dependent on a number of factors such as, how old you are and the type and value of your property.
What’s the interest rate?
Lifetime mortgage interest rates are based on a number of key factors, including the provider, your individual circumstances such as your age, property value, health and lifestyle details, and how much cash you would like to release.
When you speak one of our equity release advisers, they will arrange to give you a personalised illustration which will show you your interest rate.
Are there any fees?
Your adviser will give you a personalised illustration of how your lifetime mortgage will work, and that’ll show you any fees you need to pay.
Can I take out more later?
You might be able to borrow more later if your home goes up in value or you don’t borrow the full amount that’s available to you at the start, subject to the providers lending conditions at the time.
Do I still own my own home?
Yes, and you continue to live in it until you die or go into long-term care. You need to make sure that you keep the property in good shape and it’s your responsibility to insure your property and pay any bills, like utilities and council tax.
Can I end the lifetime mortgage early?
You may be able to end your lifetime mortgage early by paying off the loan and the interest, but you might have to pay an early repayment charge (ERC).
What happens when it’s time to sell the house?
A lifetime mortgage can be repaid but usually it is using money from selling the property. If you go into long-term care, then either you or your solicitor sells the house. If you die and have a Will in place, it'll be sold by an executor looking after your estate. It there is no Will, administrators will sell your property and any money left over after the lifetime mortgage has been repaid belongs to you or your estate.
Do I have time to change my mind?
Yes, you can opt to change your mind during the application process, as long as it’s before you sign the contractual agreement.
MORTGAGES - What is a mortgage?
A mortgage is the loan that you take out which is secured against your property that enables you to purchase your home.
The lender will charge you interest in return for lending you the money. Over the term of the mortgage you will need to pay the lender the interest and the amount you originally borrowed in full. The mortgage lender has the option of taking possession of the property and selling it on if the mortgage repayments aren’t made.
What is a Royal Institution of Chartered Surveyors (RICS) HomeBuyer Report?
A RICS HomeBuyer Report is a type of home survey aimed at homebuyers and intended for conventional properties in reasonable condition. The report describes the condition of the property and any potential risks or defects, and provides advice on repairs and ongoing maintenance. Findings are presented in a standardised format using a traffic light rating system, and may optionally include a valuation, including insurance rebuild costs.
The RICS HomeBuyer Report is a middle ground, providing more information than a RICS Home Condition Report but remaining less expensive than a RICS Building Survey.
How much can I borrow?
Every lender will be different in their approach to what you can borrow and unfortunately there is no set calculation. The actual amount you’re eligible to borrow will be determined by the cost of the property you wish to purchase, the size of deposit you have, your income and affordability which considers your monthly and any future financial commitments.
What is a remortgage?
This is simply swapping the mortgage you have on your current property for another mortgage with a different lender. You may consider this option if your existing mortgage deal has expired, and you want to see if a more competitive deal was available. You could also consider this if your circumstances have changed, and you want to borrow more. There are many reasons why you would remortgage, but this does not involve moving home.
What is conveyancing?
Conveyancing refers to the legal work completed by the solicitor or conveyancer you choose when buying or selling a property. It’s important to have either a conveyancer or a solicitor already lined up because as a buyer or a seller as you will need this in place to start and complete your transaction.
How do I prove what income I have?
If you are employed, you will need to provide at least your last 3 months payslips as a guide and sometimes your P60.
If you are self-employed, the easiest way to prove your income is via SA302s which can be obtained from HMRC. Alternatively, at least 2 years' trading accounts may also be acceptable to lenders. Some lenders may have other requirements. You will also be required to provide your bank statements for the last 3 months. If you have any other form of income, eg tax credits, then written evidence from the provider will be required.
How long do I take my mortgage out for?
The answer to this is down to your personal circumstances. We would always advise speaking to a mortgage adviser to ascertain what term is suitable to your circumstances.
How do I choose the most suitable mortgage for me?
One of the most difficult aspects of organising a mortgage is sorting through the hundreds of mortgage deals currently available. To establish what is suitable and available to you, it is important to take into account your current circumstances as well as your priorities and long-term plans.
What fees might I incur when taking out a mortgage?
Typically, fees could include:
Valuation fee - charged by the lender to value the property and generally paid-up front on application.
Solicitors’ fees – charged by the solicitor to complete the conveyancing transactions on the property.
Stamp duty land tax – a tax levied by the government on any property purchase in England or Northern Ireland over a specified value.
Land Transaction Tax - is a tax paid when you buy a residential property, or a piece of land in Wales over a specified value.
Land & Buildings Transactions Tax - is a tax paid when you buy a residential property in Scotland over a specified value.
Lender arrangement fees – charged by the lender for arranging the loan. This can be added to the loan in most circumstances but will therefore increase the size of the loan.
Booking fee – charged by the lender for booking the funds for your mortgage and typically charged on application
Broker fees – may be charged if you are using a broker and payable either up front or on completion
Do I have to repay my Mortgage by a certain age?
The answer to this is down to your personal circumstances, although in some cases it might be a lender's condition for the loan. We would always advise speaking to a mortgage adviser to ascertain what term is suitable to your circumstances.
What is the difference between a Standard Variable Rate (SVR) and a Tracker Rate?
Both of these are types of variable rate mortgages, which means that they may change as the Bank of England changes the base rate.
A standard variable rate is the lenders normal mortgage rate, i.e. does not include any discounts or deals. It tends to follow the Bank of England rate, but not exactly.
A tracker mortgage is linked to a particular base rate. Two of the most common ‘tracked’ are the Bank of England Base Rate and London Interbank Offered Rate (LIBOR).
What is an Early Repayment Charge (ERC)?
Should you wish to repay the mortgage in full or part before the deal ends, you usually will have to pay an ERC.
In most circumstances this is charged as a percentage of the loan.
Do I need insurances with my Mortgage?
Your mortgage lender will require you to have buildings insurance in place as you move into your new home. Home insurance combines buildings and contents insurance to cover your most valuable asset. We would recommend that when you take out a large debt, you should also consider protecting it against the unthinkable like death, injury or long-term illness.
How much deposit do I need?
In some circumstances, mortgages can be arranged from as little as using a 10% deposit, however generally the larger the deposit you can afford the cheaper the mortgage repayments.
Do I have to have a survey?
A Survey is not required for a mortgage, however, in most situations it is advisable. Your adviser can explain about the different types of survey available.
What’s a repayment mortgage?
A Repayment mortgage is where you pay the interest as well as the capital borrowed, so your mortgage balance is reduced every time you make a payment. In the early years you will pay mostly the interest and a little towards your capital but in the later years you pay more towards the capital.
Can I leave my property and rent it out to someone else?
Yes, but you have to get permission from your lender first before renting it out, called ‘consent to let’. The lender may increase your rate, or you will move to a buy-to-let mortgage, which is typically more expensive.
What interest rate can I get?
Mortgage interest rates are based on several key factors, such as the provider, your loan-to-value percentage, the Bank of England Base Rate, and the product type chosen.
When you speak to one of our mortgage advisers, they will arrange to give you a personalised illustration that will show you your interest rate.
What is the property purchasing process?
Please see our First time buyers guide here
What is a product transfer/switch?
Simply when your current deal expires, you can arrange a new deal with your existing lender. Your lender will not require any further underwriting to arrange your new deal. This option can sometimes be favoured over a remortgage if your existing lender is offering a better deal, or you prefer the ease of no further underwriting.
What is a decision/agreement in principle?
A decision in principle is confirmation from a mortgage lender of how much they are willing to lend you for your mortgage. A decision in principle is not a mortgage offer, however, it makes it easier to buy a home as you can show it to estate agents and new home builders to prove you are a serious buyer.
What is an interest-only mortgage?
This is a mortgage where only the interest on the loan is paid. The criteria vary for each lender and depends on a number of factors including minimum amount of equity, minimum income & having a repayment vehicle. If you want to see if you can apply for an interest-only mortgage, please can one of our mortgage advisers.
What is a retirement interest-only mortgage?
A retirement interest-only mortgage is very similar to an interest-only mortgage and a lifetime mortgage. You only have to prove you can afford to pay the monthly interest repayments. No repayment vehicle is required as the loan is usually paid off when you die, move into long-term care, or sell the house. This mortgage type is often aimed at older borrowers, therefore, most lenders have a minimum age requirement.
Can I be gifted a deposit?
Yes, some lenders will accept gifted deposits, however, most lenders require that the gifted deposit comes from a relative. This could be a grandparent, parent, or sibling. This will need to be declared during the application.
What is a second charge?
A second charge is a second mortgage, an additional loan on top of your existing mortgage, that is secured against your home. These can also be known as secured loans.
What is a Help to Build: Equity Loan?
If you are building a home or hiring someone to build one, you may be able to get a government-backed loan to cover part of the cost. You apply for this in England, Wales, and Scotland. For more information visit Apply for a Help to Build: Equity Loan: How the loan works - GOV.UK (www.gov.uk)
What is a Lifetime ISA?
A Lifetime ISA is an individual savings account that can be used to purchase your first home or save for later in life. The advantage of this ISA is the government will add a 25% bonus to your savings, up to a maximum of £1,000 per year, to help you save faster for your deposit. You can use your savings to help you purchase your first home if all the following apply:
How do I repay my ‘Help to Buy Equity Loan’?
You can pay your Help to Buy Equity loan in full or in part (minimum is 10% of your current property value, and then in multiples of 10 i.e. 10%, 20%, 30%), either with your own money, when your sell your home, or when you remortgage. Remember, you do not have to repay your equity loan until you sell your property, or you reach the end of your main mortgage term. However, you will be charged interest on the equity loan from year 6 onwards, and the rate will increase each year until you repay the loan. The process is complex, therefore, we advise speaking to an adviser to discuss your options.
What is an unencumbered property?
Unencumbered property is when you own a property outright with no mortgage or loans secured against it.
What is Rent to Interest (RTI)?
RTI calculations are imposed to ensure that the rental income is more than sufficient to meet the monthly mortgage payment.
What is a buy to let Mortgage (BTL)?
A buy to let mortgage is a mortgage for purchasing residential property with the specific aim of letting it out to tenants.
What is an House in Multiple Occupation (HMO)?
An HMO is a house where multiple, unrelated tenants have exclusive access to their rooms and share common living areas, such as a kitchen or bathroom.
What is consent to let?
Consent to let is an agreement between you and your residential mortgage lender, that grants you permission to rent out your home without having to remortgage onto buy to let finance.
How many buy to let (BTL) properties I can own?
There is no limit on the amount of many BTL properties you can own. However, typically mainstream buy to let lenders limit borrowers to either a certain number of BTL mortgages or a maximum amount of borrowing. They do this to limit their exposure to risk on property.
How can I apply for a mortgage with you?
Get in touch with one of our Independent Mortgages advisers today and we will help you select the right mortgage and assist with the application. By being Independent we have access to many products offered by many different lenders, including most Banks and Building Societies.
Our initial consultation is free of charge, however long it takes. For your reassurance, we will never levy a charge unless we can demonstrate that we can benefit you in doing so.
What is protection, and why is it important?
Protection is insurance designed to protect you and your family. There are several types of protection, the main types are Life Cover, Critical Illness Cover, Income Protection Insurance, and Private Medical Cover. As a mortgage is typically the largest financial commitment you will make in life, protection is an important part of ensuring your liabilities can be met over the term of the mortgage no matter what hurdles life puts in your way.
Apart from Building Insurance, protection is not compulsory, however, consider how will your family cope without you, how will you cover your usual monthly costs if you were ill or injured and unable to work for a prolonged period? Clearly, despite being uncomfortable, it is worth thinking about.
While you can feel that “it will never happen to me”, the risks are real and the unexpected happens to people every day
Is protection expensive?
Typically, Life cover and Critical illness cover are suitable products to protect a mortgage. Protection doesn’t have to be expensive and pure life cover is very cheap. Protection is specifically designed for every individual’s needs and budget.
What is Life Cover (LC)?
LC is designed to be a tax-free lump sum that is paid out in the event of your death or diagnosis of a terminal illness. LC is often used to pay off a remaining mortgage balance and provide the deceased’s family with financial security. LC can be decreasing (decreases in line with a repayment mortgage), level (amount of cover stays the same over the whole term), or increasing (increases over time to protect your cover amount from the effects of inflation).
What is Critical Illness Cover (CIC)?
CIC is designed to be a tax-free lump sum that is paid out when you are diagnosed with a critical illness/injury on the policy. CIC is often used to pay off or reduce a remaining mortgage balance, treatment, or changes to your home (such as wheelchair access) to help you cope with the life-altering event.
What is Income Protection Insurance (IPI)?
IPI is designed to pay a regular income long term (typically up to 60% of your income) when you are unable to work due to sickness or an accident. Some IPI policies will not pay out if you become unemployed or made redundant. Unlike LC and CIC, an IPI policy cannot be cancelled by the insurer regardless of the number of claims that have been made. IPI is used to help replace lost earnings to cover mortgage repayments, rent, living expenses, and financial commitments allowing you to maintain your family’s current lifestyle whilst you are unable to work.
What is Private Medical Insurance (PMI)?
PMI is a health insurance policy that is designed to cover the costs of private healthcare, from routine care to diagnosis and treatment. PMI will give you quick access to a GP, medical support, mental health support, and usually get treatment faster than on the NHS.
What does critical illness cover (CIC)?
The illnesses and injuries that are covered by CIC vary per lender. There are some core illnesses that all CIC must have on their policy; Heart attack (of specified severity), Strokes (permanent symptoms), and Cancers (excluding less advanced cases). Other illnesses and conditions that are generally covered are: Coronary bypass surgery, Aorta graft surgery, Kidney failure, Multiple sclerosis, Major organ transplant, Heart valve transplant, Coma, Blindness, Deafness, Loss of speech, Loss of limbs, Motor neuron, Parkinson’s disease, Paralysis, Third degree burns, Total and permanent disability/.
The specific list of illnesses and conditions will be listed by each lender and can be found in the provided policy documents.
Who can apply for Income Protection Insurance (IPI)?
IPI can be taken out if you are employed, self-employed, a contractor, or a homemaker. If you are retired or unemployed, you will not be able to apply for this cover. Providers’ criteria will vary, however, some common requirements are; you must be a permanent resident of the UK, have been registered with a UK GP for at least 2 years, be between 18-59, and work at least 16 hours per week.
How often do claims pay out?
Many providers publish their claimants (successfully paid claims) for the previous years, debunking the belief that the insurer will not pay out. Simply search on the provider’s website for the latest year’s claims.