Equity release mortgage

Equity is the difference between the current value of your house and the amount you owe on it. For example, if your home is worth €400,000 and your mortgage is €100,000, then you have equity in your property of €300,000.

If you own your home, an equity release scheme could allow you to release some of the value of your home without having to make repayments during your lifetime, move out or sell your home on the open market. The conditions of equity release include that you cannot have an existing mortgage on your home and that you have reached a certain age, for example 60, to avail of the loan

Equity release schemes are different to topping up or increasing your mortgage.

Equity release schemes are not suitable for everyone, but they may be worth considering if you need to raise a lump sum, or you need a regular income for your retirement and you:

• Don’t want to sell your home and live elsewhere and
• Are not concerned about passing on the value of your home to your family or other beneficiaries on your death

Don’t be tempted to use an equity release scheme to raise money for investments that may be risky. You could lose some or all of your investment and any return you make on your investment is likely to be less than the cost of the equity release scheme.

Choosing an equity release scheme is not something you should enter into lightly. There is always the risk that you might need the equity in your home later on, for example, to pay for nursing home care. Also be aware that if you release some of the equity from your home, you will not be able to pass on its full value to your family or beneficiaries.
With some lifetime mortgages, the lender may insist that the mortgage is paid off if you move out of your home, for any reason, for longer than six months. Ask your provider what their policy is on this.
If you are considering an equity release scheme, get independent legal and financial advice first and consider the alternatives, including:

• Selling your home and moving to a cheaper or smaller one
• Getting a different type of mortgage if you have an income to meet the repayments
• Renting out one or more rooms
• transferring ownership to a family member in return for the cash you need and the right to live in the property for life. Be sure to get independent legal advice if you are considering this option

Some companies have a fixed ‘set-up’ fee to cover the legal and valuation fees. You may need to put aside between €1,500 and €3,000 to cover these costs. Some providers may allow you to pay fees through your lifetime mortgage so that you do not need to have this money up front. However, if you pay fees through your lifetime mortgage, you will pay interest on them, meaning they will cost you more in the long run.

Also bear in mind that some schemes may prevent you from making certain renovations to your home, as your provider may consider that they reduce the value of your home. Such renovations could include installing ramps, lifts or railings, which you may need in the future, so ask your provider what their policy is on this.