Obtaining equity does not have to come at the expense of your family’s inheritance. Mark Gregory explains the options available to homeowners
Question
My husband and I would like to have equity in our home. We have four children and six grandchildren and would like to leave something for each family. Can we release property rights but also ensure that our four children receive the inheritance – no matter how small?
Our house costs £460,000 and we are hoping to get around £120,000. My husband is 79 and I am 70. How will this work continue with interest over the years?
Mark’s answer
Hello, and thank you for your question. The short answer is yes – it is possible to release equity from your home while maintaining a secured inheritance for your children.
Depending on your estate value of £460,000, your ages (79 and 70) and your desire to release around £120,000, the option most likely to be suitable is Flexible Lifetime Mortgage. This is the most common form of equity release and allows you to retain 100% ownership of your home, while borrowing against its value.
With a lifetime mortgage, the loan is usually repaid when the last homeowner dies or moves into long-term care. If no payments are made, interest is added to the loan and compounds over time, which may reduce the amount remaining in your estate. However, there are two main ways to help protect your inheritance.
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Ensuring inheritance protection
some Lifetime mortgage plans They allow you to protect a fixed percentage of the future value of your estate for your beneficiaries.
For example, if you want to guarantee 25% of the value of your home For your children, the lender will base their lending account on the remaining 75% of the property’s value. This can reduce the maximum amount you can borrow, but provides the comfort of knowing that a specific percentage of the property’s value will be protected for your family.
The exact percentage you can protect will depend on your age, the value of the property, the amount you want to release, the type of property, and the lender’s criteria. As you are looking to release £120,000, you may need to adjust the protection ratio so that the plan meets your borrowing needs and inheritance wishes.
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Voluntary payments/benefit service
The second way to help preserve an inheritance is to manage the interest during your lifetime.
Many modern mortgages allow for lifetime Flexible voluntary payments. This can include making ad hoc payments, partial interest payments, or in some cases servicing all of the monthly interest. These payments are voluntary and not contractually required, but can significantly reduce how quickly the balance grows.
If you choose not to make any payments, interest will accrue and compound, which will reduce your beneficiaries’ remaining principal. If you choose to make regular payments, you may be able to control or slow this growth and preserve more of your estate.
The right approach may be a combination of both: protecting a fixed percentage of your property’s value and offering voluntary payments where possible.
Our advisors will fill out a complete financial questionnaire with you, assess your goals, and provide clear illustrations showing how your loan can grow with and without payments. They can also show you the level of inheritance protection that may be available depending on your circumstances.
You can Find a consultant on our websiteOr contact the team 0800 802 1051. There is no obligation, and the consultation fee is only paid if the recommended plan is completed and you are completely happy.
Meet our expert…
Mark Gregory, Founder and CEO Supermarket stock issuehere to answer your questions. Mark is himself a consultant with over 20 years of equity issuance experience.
He launched Equity Release Supermarket 10 years ago and has developed into one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask a question
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