Many landlords are now considering releasing equity from their buy-to-let property to supplement their retirement income. There are many reasons why people might want to release equity from their property. Perhaps you need a large sum of money quickly and can’t get it any other way, or you’re simply looking for the best possible returns on your investment. Whatever your reason, equity release can be a great option if done carefully and wisely.
This can be a great idea, but there are some things that you need to consider before taking the plunge. In this blog post John Lawson, Equity Release Expert from SovereignBoss, will talk about some of those considerations and help you make an informed decision about whether equity release is good for your business.
Length of Lease & the Minimum Lease Length for Equity Release
A 99-year, 125-year, or even 999-year lease is frequent when a property is leased. As previously stated, the lease length will be listed on your title papers. Remember that flats are normally leasehold, so make sure you verify the lease length before you buy. You would have the full length of the lease if you bought your flat brand new. If you bought your flat from a prior owner, however, the remaining lease term will be reduced by the number of years after the lease was signed.
Lenders will have a minimum criterion for the number of years left on the lease when considering equity release for a leasehold flat. This figure varies per lender, with some wanting a minimum of 75 years remaining and others requiring a minimum of 90 or 125 years.
Using Equity Release to Extend Lease
If you don’t have the means to extend your lease before taking equity release, you do have another alternative. Your lease extension may be completed concurrently with your equity release application, with some of the equity release money used to cover the lease extension fees. If you choose with this option, the equity release lender will want to look over the lease extension and approve it. Furthermore, your equity release application will only be completed once the lease extension is complete.
Taking Equity Release If Your House Is Leasehold
While leasehold is most associated with apartments, it is increasingly being used to describe new construction homes. It is absolutely allowed to take out equity release loans if you own a leasehold home. You will, however, be responsible for paying the freeholder a ground rent. An equity release lender will want to see your lease agreement to see if the ground rent costs fulfil their requirements.
Equity release is a safe and secure way to use your property as collateral for the loan that will provide you with an income. This type of financing also has no maximum age requirement so it may be available to those who are looking at retirement and want additional security against future falls in their standard of living. Guaranteed lifetime cover is included too which protects borrowers from any potential increases in interest rates over time. If you’re thinking about equity release, be sure that it’s right for your needs and financial situation before proceeding with an application.
