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Equity Release in Cambridgeshire

Lifetime Mortgage & General Equity Release Advice in Cambridgeshire

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Equity Release in Cambridgeshire 

Equity release in Cambridgeshire is a scheme that allows you to access the money that is tied into your property in the form of an equity loan that does not need to be repaid while you are alive. 

There are two main types of equity release products, which are lifetime mortgages and home reversions. Each one offers something different to homeowners and comes with unique pros and cons. 

Equity release in Cambridgeshire works the same as everywhere else in the country, but certain factors influence how homeowners experience the scheme, such as which lenders are available in the area and what the current property market is like.  

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What is a Lifetime Mortgage & How Does it Work? 

Unlike a conventional mortgage, with a lifetime mortgage, you take out a loan but you are not expected to make monthly repayments after it. You can choose to make repayments with certain plans, such as the voluntary repayment plan, but generally, you will not be paying back the loan while you are alive. 

You can choose to receive the money either as a lump sum or in regular instalments, depending on what you want to spend the loan on and what your financial situation is like. Either way, the money will be completely tax-free but interest will be charged on it. 

There are eight different types of equity release lifetime mortgages, and they are: buy to let, drawdown, income, interest only, lump sum, voluntary repayment, enhanced, and second home. 

For this reason, lifetime mortgages are accessible to a wide range of people, whether it’s a disabled homeowner who needs home improvements, or someone who is looking to purchase a property to rent out. 

At the end of the lifetime mortgage scheme, the equity release lender will arrange the property sale and take the money that is raised from it, before leaving the rest to the family of the homeowner. 

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What are the Pros of a Lifetime Mortgage in Cambridgeshire? 

Firstly, with a lifetime mortgage in Cambridgeshire, you are still going to be the homeowner of your property, so you maintain the same rights and you do not have to move out of the home. The scheme lasts until the final homeowner has passed away, so you will never be forced to move out when your partner passes away. 

Secondly, you can access a large amount of money with a lifetime mortgage in Cambridgeshire. Homeowners can usually borrow between 20-60% of the value of their home. Younger homeowners will be entitled to less, but older homeowners are likely to access up to 50% of the value (1). 

Finally, as you do not pay tax on equity release funds, you get to benefit from a large amount of money. You may be able to fund something that you have always dreamed of, such as a brand-new car or luxury holidays. 

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What is a Home Reversion & How Does it Work? 

Home reversion customers sell a share of their property to an equity release lender, with some homeowners even choosing to sell 100% of the property (2).  

The lender purchases the property for less than the market value and then provides the client with a tax-free lump sum of cash, the value of which depends on the value of the property. 

At the end of the home reversion plan, the homeowner’s family is expected to remove their possessions from the property as quickly as possible, often within a week. The property is then sold and the proceeds go first to the equity release provider, and then to the family. 

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What are the Pros of a Home Reversion in Cambridgeshire? 

Firstly, the amount of cash you could get from selling your home could be life-changing.

It is always offered as a lump sum, so you will be able to fund large projects such as home renovations without waiting until you have saved up your monthly instalments. 

Secondly, you are able to protect a share of your home for your family, which ensures you will still be able to pass on an inheritance to your loved ones despite taking out equity.

This inheritance protection is a common part of most home reversions nowadays, so it is very easy to arrange. 

Finally, home reversions are becoming more flexible over time, which is causing them to rise in popularity.

For example, it is often possible to move home with a home reversion and take your plan with you, which is great news for people who decide they want to downsize after taking out equity. 

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Are there any Negatives of Equity Release in Cambridgeshire? 

Yes, there are certainly some negative points relating to equity release in Cambridgeshire. The scheme is not suitable for everyone, and some people would indeed be worse off if they released equity from their Cambridgeshire property. Here are a few disadvantages of the scheme. 

1. You will be in debt 

As much as we like to emphasise that repayments are not obligatory with equity release in Cambridgeshire, it is true that you will end up in debt if you take this route. 

Some people can dismiss the debt as they know there is no pressure to repay, but others will be anxious about it regardless. If you know this is something you are likely to worry about, equity release may not be the best option for you. 

On the other hand, most people are in some form of debt, usually with an outstanding mortgage. Arguably, it’s better to be in debt with money that does not have to be repaid rather than having to make your money stretch to pay off your debts on a monthly basis. 

2. You will have less inheritance to pass on 

As you will be in debt, the equity release lender will need to take back the money you owe them through your house sale. This will leave less money to your family and friends, and you may not be happy with this. 

You can protect some of your inheritance, but the fact is that you will have taken out an unsecured loan, so your family and friends will be left with less money.

You could try to overcome this by gifting your loved ones with some of your equity release funds before you die, or purchasing things for them such as houses, cars or weddings. 

We always advise you to discuss equity release with your family before making a final decision, as it will affect them as well as you.

You should still follow your gut instinct, but your family members may provide useful insight, especially if they are familiar with the equity release scheme in Cambridgeshire. 

3. The interest will accumulate 

With equity release in Cambridgeshire, you cannot avoid the fact that you will owe a large amount of interest, and this will accumulate over time. At the end of the scheme, compound interest will be charged on the money, and this is often a very large amount. 

You can repay some or all of the interest if you select an interest only lifetime mortgage, and this would mean you would end up in less debt. However, this is only possible if you can afford to make monthly repayments on the interest, and not everyone can. 

It is true that the interest rates on equity release are usually lower than other schemes, but as it accumulates over time, you will owe back more interest than you would on a traditional scheme. 

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4. It is difficult to back out of the scheme 

One reason equity release is such a big decision for homeowners is that it is a lifelong commitment that is very difficult to back out of. Nowadays, most lenders will allow you to exit the scheme early. However, they may charge an early repayment fee which can be costly. 

There are things you can do to change your situation instead of exiting the scheme entirely, but again, it will not always be straightforward.

If your lender is a member of the Equity Release Council (ERC), you can request to move into a suitable alternative property, and this would be a great solution if you are simply bored of your property, or you need to move to be closer to family. 

The challenge is that the new property must be approved by the equity release provider, so you cannot simply move into any home that you desire.

What’s more, the loan amount will be adjusted according to the value of the new property, so you may not be entitled to as much money and you may even have to repay the lender to even out the borrowed amount. 

Please call our 24-Hour Helpline: 0330 058 1579

Equity Release in Cambridgeshire: Can I Rent Out My Home? 

You cannot rent out your property if you have released equity from it. This is something to keep in mind as you do your research, as it is non-negotiable so you should not pursue equity release in Cambridgeshire if you want to rent out your home. 

You could rent out your home separate from releasing equity and use this as a steady source of income.

If you do this and still feel a desire to take out equity, then you will have to decide whether it is worth giving up renting out your home in order to pursue equity release in Cambridgeshire. 

Another option is to take out a buy-to-let lifetime mortgage in order to purchase a new home that will be a rental property.

This would allow you to remain in your current property while still earning money from tenants. However, you would have to be entitled to a large loan for this to work, and not everyone can release enough money to fund a second home. 

Please call our 24-Hour Helpline: 0330 058 1579

Equity Release in Cambridgeshire: Can I Take Out Equity If I am in Debt? 

Yes, you can release equity in Cambridgeshire if you are in debt. Many people use their equity loan to pay off existing debts, including traditional mortgages.  

Sometimes, people will be rejected from equity release plans as their credit rating is extremely poor, and therefore their debts have prevented them from taking out equity.  

However, this is very rare given that not all plans involve credit checks, and lenders recognise that the most important factor is the value of the homeowner’s property, and not their credit history. 

Please call our 24-Hour Helpline: 0330 058 1579

Equity Release in Cambridgeshire: Can I Take Out Equity If I am Under 55 Years Old? 

No, you cannot take out equity in Cambridgeshire if you are under 55 years old. All lenders in Cambridgeshire will reject clients that do not meet this minimum age requirement. For a joint application, both homeowners must be at least 55 years old.  

This rule applies to both lifetime mortgages and home reversions. However, with a home reversion, the minimum age is even higher, at 65 years old for most lenders.  

The reason equity release lenders tend to prefer older homeowners is that they will be on the scheme for a shorter period of time, so there is less risk involved in offering them a loan.

What’s more, the lender will benefit from the money sooner than they would with a younger applicant, as they inherit the money when the homeowner passes away or enters permanent care.

Please call our 24-Hour Helpline: 0330 058 1579

Get in Touch 

We hope you have a better understanding of equity release in Cambridgeshire, including what it is, how it works, and who is eligible. If you still have any queries, please head to our help centre where we answer frequently asked questions about equity release. 

For a free initial consultation, call us on 0330 058 1579 any day of the week between 8am-8pm. We will explain more about equity release in Cambridgeshire, as well as introducing you to the specific plans that are available. 

You are now aware that the two main equity release products are lifetime mortgages and home reversions, but did you know that there are eight different types of lifetime mortgage?

There is so much more to learn, so please do reach out to us to get to know this scheme in more detail. 

References 

[1] Lifetime mortgages https://www.which.co.uk/money/pensions-and-retirement/youre-retired-working-on-benefits-equity-release/equity-release/lifetime-mortgages-ak6320x3rltn 

[2] What is a home reversion plan? https://www.sunlife.co.uk/equity-release/what-is-equity-release/what-is-a-home-reversion-plan/ 

 

 

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