Hotel Review: The Harrison, Belfast, Northern Ireland
The Harrison, Belfast, is a converted Victorian Mansion in the heart of the city.
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Equity release mortgages explained – expert advice for homeowners
For most people, your home is your most valuable asset. It can seem like a goldmine, if you’re living in a house you bought 30 to 40 years ago. So, equity release mortgages can be useful. We currently have the best mortgage rates in years so maybe this is the right time to release equity in your home.
Back in the early eighties, average property prices were around £20,000, compared with over £250,000 today, according to financial services company Sun Life. So, as you get older you may find you’re property rich, but cash poor.
Equity release mortgages explained
Image credit: Future Plc/Olly Gordon
Downsizing is the obvious solution to release some of the wealth in your property. But, if you want to stay put and make money from your home, equity release schemes are proving popular.
According to the Equity Release Council, homeowners are expected to unlock £4 billion this year.
What is equity release?
Equity release is a way to release some of the equity that’s built up in your home. You can have this as a tax free lump sum to spend however you like. It could be for a holiday, home improvement, or helping the grandchildren with a deposit for their first home. These are all common reasons many people look into the option of an equity release mortgage.
You do this by taking a loan, known as a lifetime mortgage, or selling a share of your property, with a home reversion plan.
Both options work in very different ways and come with their own risks. They are both regulated by the Financial Conduct Authority – the financial services industry regulator.
Typically available for homeowners age 55 and over, providers include big names like Aviva, Legal & General, LV=, OneFamily and Canada Life as well as Just, One Life and Pure.
Lifetime mortgages
This is the most popular equity release mortgage option. A lifetime mortgage is a specialist mortgage product. It does not have to be repaid until your home is sold, possibly after your death, or when you go into long-term care.
In the meantime, you can decide whether to make monthly interest payments or stay completely payment free. The original amount borrowed, plus any interest, is eventually paid from the sale of your property.
Lifetime mortgages come with different features. One option that works well for many homeowners is a drawdown facility. This allows you to dip into allocated funds, rather like a bank account, rather than taking the whole loan upfront. What’s the advantage? Interest only accrues on the amount you take, instead of on a big lump sum.
Image credit: Future Plc/Colin Poole
How much equity can be released?
How much you can borrow depends on your age, health and property value. The maximum amount is usually up to 60% of the value of your property. In most cases, your home must be worth at least £70,000 and in good condition.
Interest rates are fixed for life, providing you use members of the Equity Release Council. Interest currently averages around 4%. This is much higher than the fixed or discounted deals available with mainstream mortgage lending. Although it’s worth noting that 4% is on a par with most lenders’ standard variable rates.
What is a home reversion plan?
In a home reversion plan, you sell a share of your property but retain the right to stay living there. These plans account for just 1% of the equity release market and are usually only available for the over 65s.
By selling part of your property, you get a tax free lump sum or regular income. But, you may only get 25-60% of the market value on the portion you sell. When your home is eventually sold, the equity release company takes their cut. That amount is usually a pre-determined percentage of the property you sold.
Charges and fees
‘There are three types of fees you need to be mindful of with equity release,’ says Mark Gregory, founder and CEO of Equity Release Supermarket, an equity release advisory service.
‘Firstly, there are lender’s fees which can include application and valuation fees. Although, many lenders waive both these costs. Secondly there’s solicitor’s fees, as you must have independent legal advice.’
Fees can vary depending on your solicitor. As a rough guide, you should budget around £700 plus VAT for these.
‘Lastly there’s a fee for financial advice. This is a requirement of taking equity release and costs can vary widely.’ Some firms have fixed fees, while others charge a percentage of the amount released.
Do Equity release mortgages affect inheritance?
Image credit: Future Plc/Jemma Watts
The big issue with equity release is how it affects any inheritance you’re planning to leave.
With a lifetime mortgage, the debt will quickly rack up, as interest is compounded. This means interest is added to the amount borrowed in year one; you then pay interest on this larger amount in year two and so on in subsequent years.
As a rough guide, borrowing £50,000 from your property over 10 years, on the current average interest rate of 4.26% (without making capital or interest payments), will incur £25,883 in interest charges, according to the Equity Release Council. And it will take 17 years for a loan to double in size.
It’s important to discuss the subject of equity release mortgages with your family, so everyone understands the situation. It may well be that your children will prefer to receive a smaller inheritance if doing so enables you to live comfortably. Communication is crucial.
‘Equity release can lead to family disputes after people die,’ warns Martyn James, a consumer expert with independent complaints resolution service Resolver. ‘While it’s your money, if you’re going to do it, explain your decision to the people who are going to inherit.’
The bottom line is that equity release can offer the chance to enjoy a comfortables retirement, or pay off debts or loans with disposable cash. But it’s important to consider other ways to achieve those goals before making a final decision.
Can an Equity Release Mortgages be repaid early?
Image credit: Future Plc/David Helsby
‘Over 68% of equity release products allow voluntary capital repayments, typically up to 10% of the original loan each year, with no early repayment charge, says Jim Boyd, CEO of the Equity Release Council. This is useful if you find yourself in a position to pay off some of the advance – because you inherit money, for example.
Higher amounts will attract charges, usually on a sliding scale, depending on how long you have the products. Check the terms to see what providers allow. Saga has a ‘money back guarantee’ lifetime mortgage, which gives customers six months to change their mind and repay the balance in full.
Seeking specialist advice
‘People can only take out an equity release product via a qualified and regulated financial adviser, says Jim Boyd. ‘Expert advice is essential to weigh up the benefits, costs, the impact on tax, benefits and inheritance, and possible alternatives to equity release.’
Members of the Equity Release Council have a ‘no negative equity’ guarantee. This means you’ll never owe more than the value of your home, plus you’re guaranteed independent legal advice. All members are authorised and regulated by the Financial Conduct Authority.
Bear in mind any government benefits before applying for equity release mortgages. Having a pile of cash will affect your entitlement, especially with Pension Credit or Universal Credit.
The post Equity release mortgages explained – expert advice for homeowners appeared first on Ideal Home.
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When to replace a boiler – signs it’s time to buy a new one
The boiler is the engine of your home. Its primary job is to keep all your household facilities working and running smoothly. Sometimes things can go wrong – whether old or new – so it’s important to know the signs so you can spot when you need to replace a boiler.
You boiler is a vital appliance that sends hot water to your radiators and underfloor heating. Plus, of course, it’s the essential source that supplies endless hot water to taps in your kitchen, bathroom and utility room for all your daily needs.
When to replace a boiler – signs it’s time to buy a new one
Image credit: Worcester Bosch
Only engineers registered on the Gas Safe Register are legally qualified to install, repair or move a central heating boiler. Carbon monoxide poisoning can be fatal so always check the tradesperson’s Gas Safe Register ID card to ensure they have the right qualifications for the job.
Here are the most common reasons it could be time to invest in a new central heating boiler for your home:
1. It’s an old boiler
If you have an older boiler that hasn’t been updated for a number of years, it’s likely that you will need a replacement. ‘Experts recommend that you get a new boiler when it is around 15 years old,’ explains Andy Kerr, Founder of smart home systems installer BOXT.co.uk.
2. It’s wasting money
‘In those 15 years technology will have drastically advanced – especially in the world of boilers,’ continues Andy. ‘What was once a white, industrial-looking box stuck on the wall can now look like something out of an Apple store. Not only visually but mechanically they’ve improved. Quieter, compact, and more efficient than ever – modern boilers save you money.’
3. It’s no longer energy efficient
The thing that impacts your boiler efficiency the most is its age. When an old boiler uses more energy than necessary to heat your home and water, it is producing more carbon emissions. When fossil fuels such as gas and oil are burnt with oxygen, they produce CO2, which is a greenhouse gas that contributes to climate change.
There’s been a lot of talk about a gas boiler ban in recent months, as the government ramps up its net zero plans for 2050. ‘Boiler efficiency is measured by how efficiently your boiler turns its fuel into heat energy,’ says Mark Glasgow, Director of The Edinburgh Boiler Company ‘Essentially, an efficient boiler uses the least amount of energy and money and produces fewer carbon emissions. It’s a win-win situation for both you and the planet.’
4. It’s broken or faulty
Even a boiler still under the recommended age and warranty can get a fault. It’s important to have an annual service (preferably in the warmer months) to pick up any problems.
Faulty boiler signs to look out for
Image credit: Vaillant
There are a number of ways a boiler can become faulty. Each problem has warning signs you should look out for. If your boiler constantly continues to suffer from any of the below issues, it may be more cost-effective to recognise when to replace a boiler, rather than repairing an old one.
Leaks or drips
Your boiler can begin to leak in a number of places. To really pinpoint the exact problem, you need to know where your boiler is leaking from. The most common cause of a leaking boiler is a broken component inside the boiler. The pump seal or pressure valve could be damaged.
If the pressure valve is the culprit, your boiler pressure may be too high (see below). If it is the pump, then it may simply have become worn out from excessive or constant use over time. Other common places you may find leaks include the pipes of your system. This can be due to corrosion, so it’s best to get in touch with an engineer who will be able to correctly identify the problem.
Lower pressure
Low boiler pressure can be caused by a number of factors, including water leaks, bleeding radiators as well as the need for a new pressure valve.
‘It’s easy to check the pressure of your boiler. All you need to do is look at the built-in pressure gauge. If the needle is below 1, you may have a problem that needs addressing,’ says Andy Kerr.
If you’re losing pressure quickly – even when re-pressurising your system – get in touch with an engineer to find out the underlying problem.
Higher pressure
If a pressure gauge measures above 2.5 it’s considered too high. Too much water in the system or malfunctioning boiler parts are usually the main culprits. The extra pressure will put stress on the system which can lead to cracks and leaks.
Image credit: Vaillant
Excessive noises
Strange noises coming from your radiators or system is usually an indicator there is a fault. Sometimes, the sound itself can pinpoint the problem:
Gurgling Are you hearing bubbling noises? This is usually caused by air trapped in the radiators, which can be rectified by bleeding radiators. Or, there is trapped air in the main system.
Kettling This is a term used when a whistling is heard similar to that of boiling a stovetop kettle. This may be the result of limescale build upon key internal components which then overheat.
‘Not only is this a noise issue,’ says Ben Mars, resident Gas Safe Engineer at Heatable.co.uk, ‘but consistent overheating can also result in the development of cracks and broken seals in the heat exchanger or nearby components, resulting in a leak.’
Humming If there is a humming or vibrating in the system, this could signify that the heating elements are not working properly. This suggests there’s a fault. ‘All boilers have some level of noise as part of its normal operation,’ says Ben. ‘If it’s a new noise, then it’s more likely there is a problem. Common causes are loose components, high water pressure or the pump running too fast.’
Dripping The likelihood is there is a leak somewhere which can lead to pressure loss or electrical component damage.
Clicking or tapping This generally means there may be an ignition failure.
No hot water
If a boiler is heating the house but not supplying hot water, the diverter valve may be defective. This problem is common in older boilers that have had a lot of use. The diverter value becomes worn, weakened or seized.
No heating
Faulty thermostats that control the temperature of the room may be the culprit. Or, boiler pressure may be to blame.
If neither are guilty it’s time to call an engineer. ‘Common reasons for this particular fault are broken diaphragms and airlocks, a motorised value failing,’ says a spokesperson at Auragas. ‘These issues will need a professional heating engineer to come and fix or replace the faulty part.’
Image credit: Heatable.co.uk
Constant ‘lockouts’
A boiler lockout is a shutdown procedure that initiates when the boiler is not working. If this is happening regularly and engineer callouts are becoming more frequent it may be time to consider whether a new boiler would save money in the long run. The older a boiler gets, the more difficult may be to source new components or parts. So, in fact, it will have become Beyond Economical Repair (BER).
If you notice any of these signs, seek the help of a professional right away. Visit the Gas Safe Register to find a qualified engineer near you.
The post When to replace a boiler – signs it’s time to buy a new one appeared first on Ideal Home.
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