Halifax equity release (What if)
In this brief guide, we are going to discuss the Halifax equity release, what an equity release is and the main benefits or disadvantages of such a scheme.
Does Halifax offer equity release?
No, Halifax does not offer a range of equity release products but this guide will cover what the equity release products will look like if there was a Halifax equity release product line.
Equity release products are generally suited only to people over 55 years of age. The mortgage balance is paid off when the borrower dies or moves into long term care. We will expect the same terms for a Halifax equity release.
Equity release mortgages are usually either:
A lifetime mortgage or a retirement interest-only mortgage
What is a lifetime mortgage?
The lifetime mortgage is a mortgage you take out which is secured on your property. With this mortgage, you can either take it out on all of your property or just some. This means you can ring-fence away some inheritance for your family upon your death.
With the lifetime mortgage you get a large lump sum and you will be charged interest on the capital borrowed. You can either choose to pay this interest on a monthly basis or you can roll it up till the end of the mortgage term which means you don’t make any monthly repayments. The mortgage term ends when you die or move into long term care, at which point the mortgage lender will sell your home to recover the capital plus interest borrowed.
What is equity release?
Equity release is the process of releasing the equity in your home. This means the part of the property you own. You can only do this if you are over 55 years of age. You will be able to get a lump sum payment or you can take out little amounts as you wish or you can do a combination of both.
With equity release you don’t have to sell your property or move homes. It is targeted at older people who own a large or significant portion of their home and need access to funds or a regular income. You will not have to give the money back to the equity release mortgage lender but rather they will recover it by selling your home upon your death or when you move into long term care.
Will you be eligible for a Halifax equity release?
To be eligible for the Halifax equity release you may need to be aged between 55 and 95 years of age.
The property may need to be your main residence or will be your main residence upon acquisition.
Alternatives to the Halifax equity release
Getting a Halifax equity release product is serious business and you should seek independent legal and financial advice before doing so. You should consider other options for financing your life rather than taking on a Halifax equity release mortgage. You should also consider how a Halifax equity release mortgage could affect how much you leave in your will to your family and friends.
Taking on the Halifax equity release could also potentially affect your income tax liability as well as any benefits which you currently receive.
Before taking on a lifetime mortgage you will need to speak to a legal representative to get independent legal advice.
Below are some alternatives to taking out a Halifax equity release product.
“ Downsizing your home:
Downsizing your home may be a good alternative to a Halifax equity release product. If you already have a home with a lot of equity tied up in it then it may be a good option to simply sell your house and buy a smaller one especially if your kids have moved out and you have empty rooms.
By doing this you will have access to a large pot of cash from which you can live off.
You should bear in mind that there will be other costs associated with moving home such as stamp duty, estate agent fees, mortgage application fees, conveyancing fees etc.
Downsizing your home may not be an alternative to equity release for everyone. At first, you will need to have enough equity in your home which is sufficient for you to buy a new smaller house if not you may need to find a mortgage to pay for your new home and most mortgage lenders have restrictions on the age of the borrowers they lend to.
If you need to get a mortgage you will also lose out on the benefits of being a cash buyer which will allow you to negotiate and get a better bargain from a home seller.
Downsizing after an equity release
It should be possible for you to downsize after a Halifax equity release if you have released equity through a lifetime mortgage.
All equity release Council plans must include portability with a downsizing protection option to enable equity release borrowers to downsize (typically after 5 yrs) and repay without any early repayment charges.
You should also be able to switch equity release providers if your equity release is a lifetime mortgage.
The process is very similar to switching mortgage providers for a better rate and lower monthly payments.
Depending on when you took out the lifetime mortgage and what type of deal you entered into, switching can be a way to save money if you’re out of contract and find a better rate.
Ask your family for financial assistance:
The main concern for most people when thinking about equity release schemes is that they will not leave much money behind for their family. An alternative to Halifax equity release schemes could simply be to ask for your family to help during financial difficulty.
One of the only ways you can ensure your family gains most of your property as an inheritance upon your death is by preventing the amount of interest which is accrued with an equity release scheme or prevent getting into an equity release scheme in the first instance.
For these reasons, family members are more likely to want to assist in preventing much of the home end up with the equity release provider and will be more likely to help.
Use the Governments rent a room scheme:
You could simply take in a lodger by using the governments rent a room scheme and benefit from a £7.500 tax-free income annually. Even if you aren’t eligible for the rent a room scheme the income you earn may be sufficient to help you.
If your home is mortgaged, ensure you have checked with your mortgage lender to ensure you aren’t breaking the terms of your mortgage agreement by taking in a lodger.
If you rent from the council or recently bought your home using the right to buy, preserved right to buy or the right to acquire scheme then you should ensure you check with your council or landlord before taking in a lodger. Using the rent a room scheme may be a good alternative to a Halifax equity release product.
Use other means of finance:
You may be able to borrow from your credit cards, get a secured loan on your property or get an unsecured personal loan. Although some of these methods of finance may prevent you from borrowing for a long period of time depending on your age, credit score and current income, some may be suitable for you and may represent better value over your term of borrowing than with a Halifax equity release scheme.
Reduce your living costs:
The first reason why many people will seek a Halifax equity release scheme is that their current living expenses are probably too much in comparison from whatever income they may be receiving from businesses or their pension.
A possible solution to this problem which may be an alternative to an equity release scheme will be to cut down on your current living expenses.
This could mean refinancing your car, remortgaging to a better rate (if your home is mortgaged), refinancing your personal loan, switching to a cheaper credit card, switching your broadband, switching your electricity and gas supplier etc
Obtain a grant for home improvements:
If you are looking to use a Halifax equity release scheme as financing for any home improvements you want to make on your home then you should look to see if you can obtain financing from your local council as an alternative to equity release.
You may be able to obtain financial help from your local council if you are looking to fit a lift or cavity wall insulation in your home. You will usually need to be a low income household for any grant funding to be available to you.
Use your investments and savings:
Your investments and savings could be used as an alternative to a Halifax equity release schemes if you currently have any investments or savings.
When applying for an equity release scheme you will undertake a fact find which will look to determine your complete financial situation.
If the adviser feels that you should possibly use savings or investments you already have which may save you thousands of pounds in interest over the next few years in comparison to an equity release scheme then they will let you know.
By doing this you are essentially pushing back the need for an equity release a few years back and saving yourself some money.
Apply for eligible benefits:
There are many benefits which you may be eligible for based on your income, where you live, your age etc. You should always check to see you have claimed all benefits which you are eligible for as this could boost your oncome and be a good alternative to equity release.
You may be eligible for benefits such as pension or savings credit, council tax reduction or even disability benefits. Benefits may be a good alternative to a Halifax equity release product.
Go back to employment:
An alternative to a Halifax equity release scheme could be to simply go back into employment or start a part-time job or business. This will mean you can earn extra income to help you and prevent you from needing an equity release scheme at least for a year or so.
Get a standard remortgage:
Not all mortgage lenders will lend to people over 75 but if you are under the age of 75 then you may be able to get a standard remortgage where you essentially extract equity out of your home without having to use a Halifax equity release scheme.
You should seek the advice of a mortgage broker, an independent financial adviser and maybe a legal advisor before you do this.
Remortgages will incur costs such as conveyancing fees, mortgage fees, stamp duty etc.
Note: mortgage lenders don’t just look at your age when you take out the mortgage but your age upon when the mortgage term should ideally end.
To be eligible for a remortgage you will ideally need a good credit score, if not you should look to build credit, a sizeable mortgage deposit or equity and some regular income. You may also be eligible for interest-only mortgages if you find it difficult to get a standard remortgage.
Use a retirement interest only mortgage:
A retirement interest-only mortgage is a more flexible product and an alternative to equity release schemes. Retirement interest-only mortgages are less strict than interest-only mortgages as the mortgage lender does not have strict guidelines on the repayment method or vehicle.
Retirement interest-only mortgages will usually let you borrow more than an equity release and will also require a small mortgage deposit.
“ source Huuti- Alternatives to equity release
Applying for a Halifax equity release
Halifax doesn’t currently have an equity release line but if they did you will likely need the below documents.
To make the application process go much smoother you should bring the below information:
Details of your income
Details of your expenses such as credit cards, loans etc
Council tax details
Information about your Buildings insurance
Life insurance and mortgage protection
Savings and investments
any pension dependency clause information your pension may contain (if a joint application)
In this brief guide we discussed the Halifax equity release. If you have any comments or questions please let us know below
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.