So, what is equity release?
'Equity' is the term given to what your home is worth after allowing for debts such as mortgage loans that have been secured on it. Equity Release allows you to convert some of the equity to cash in your hands without you having to sell up and move out.
Of course, you can raise money at any age by increasing your mortgage, but Cavendish is able to offer plans that are exclusive to homeowners who are 55 or over: they allow equity to be released without any need for you to make monthly payments.
How can equity be converted to cash?
Home Reversion Plans
These plans allow you to sell all, or part of your property now, for a tax-free cash lump sum. However, a legal agreement guarantees that you can continue to live in your home rent-free (or for a nominal rent such as £12 per year), for as long as you wish or until you die.
To qualify for a home reversion plan you will generally have to be at least 65 (or the youngest joint applicant at least 65). The amount of cash you'll receive will vary with age and whether you're male or female. You can expect to raise between 35% and 72% of the property's vacant possession value.
This is a home reversion plan. To understand the features and risks, ask for a personalised illustration.
back to top of pageLifetime Mortgage Plans
There are three main versions of the lifetime mortgage plan and each is designed to do a different job. What they all have in common is that you retain ownership of the home and borrow a percentage of the property value.
Roll-up – Cash Lump Sum
These plans allow you to borrow a percentage of your property's value, but you don't have to make any monthly mortgage repayments of the loan or interest.
Unlike a conventional mortgage, there is no set repayment date. The loan becomes repayable on the sale of the property when the last applicant dies, or moves into long-term care. The loan can be repaid earlier but then may be subject to an additional early repayment charge.
As a safe guard, the plans offered by Cavendish Equity Release include a no-negative equity guarantee. This means that if you keep the property in good repair and comply with the terms of the agreement, neither you nor your estate will ever be required to repay more than the property's value even if the total loan, plus any outstanding interest exceeds the actual value of the property.
Roll-up Drawdown
Another version of the lifetime mortgage plan: instead of taking a single lump sum initially and making additional applications for further advances, a drawdown plan allows you to receive a series of smaller cash lump sums.
With a drawdown plan the maximum amount you can borrow is agreed by the lender. You take a smaller initial lump sum and then have a cash facility to withdraw amounts as and when you need them.
The amounts drawn down are secured on your home and are repayable with interest, from your estate. Interest is only charged on the money you have drawn down.
Interest Only Lifetime Mortgage
A home reversion plan and a roll-up lifetime mortgage plan do not require any monthly repayments. If you have an interest only lifetime mortgage you receive a lump sum and pay interest on the loan each month. This type of plan is only suitable if you have a regular source of income such as a salary or pension.
The interest rate (and therefore the monthly payments) is fixed at the outset and payments are made monthly. The result is that the amount of the loan does not increase, unlike a Roll-up Lifetime Mortgage Plan. Unlike a conventional mortgage there is no fixed term and the amount you originally borrowed is repaid when your home is sold.
Cavendish will only recommend interest-only plans where there is a provision which allows you to convert to a Roll-up Lifetime Mortgage where no repayments are required.
This is a lifetime mortgage. To understand the risks and features, ask for a personalised illustration.