This guide talks you through your later life finance options including how you release tax-free cash from your property using equity release.
For the life in later life Helping you take control of your later life finances
Get advice today 0800 294 3171
Contents What is equity release? Types of equity release
4 5 7 8 9
Benefits and drawbacks of equity release What other options are there?
Further options explained Is equity release right for me?
10 11 12 14 16 18 20
How would you spend your tax-free cash? How much could I release with a lifetime mortgage?
Compound interest explained Lump sum vs drawdown Payment-term lifetime mortgage Interest reward lifetime mortgage
How can I reduce the cost of my lifetime mortgage? 22 Other ways to reduce the cost of your lifetime mortgage 23 Flexible features for personalised plans 23 Considering the impact of house prices 24 Is equity release safe? 25 Equity Release Council guarantees 25 Can I tailor my lifetime mortgage? 26 The equity release process 27 What are the most commonly asked questions? 28 Wills & lasting powers of attorney 29 Why choose Key? 30
PLEASE CONSIDER THE ENVIRONMENT BEFORE REQUESTING A PRINTED COPY
2 Get advice today 0800 953 3743
At Key, we believe later life is for the opportunities yet to be discovered, the horizons yet to be explored, and the memories yet to be made. We believe it’s for the peace of mind knowing your existing mortgage is fully repaid, for the joy of being able to help your family when they need it most, and the comfort of knowing you can do so without having to leave the home you love. We believe later life is for living. And through our specialist products and personalised advice, we can help you take control of your finances so you can put the life in later life. For more than 25 years, we’ve been helping people live the later life they want.
Within this guide, we’ll explain how you could take control of your finances with the help of equity release and what you should consider before making a decision. We’ll also cover some of your other options, such as retirement interest-only and later life residential mortgages, both of which are also available through Key. Key, for the life in later life
Our specialist advice and products are specifically designed for those aged 55 or over, and our expert advisers will take the time to understand your needs before making a recommendation that’s personal to you. We’ll give you all the information you need to make smart, well-informed decisions about your later life finances, and we’ll support you throughout the process, answering any questions you may have along the way.
3 Get advice today 0800 294 3171
Are you eligible? You may be eligible for equity release if:
You're aged 55 or over You're a homeowner with a property worth at least £70,000
What is equity release? If you’re a homeowner aged 55 or over, equity release allows you to access some of the cash locked in the value of your home.
Your property’s value, minus any outstanding mortgage or loans secured against it, is the equity. This equity is often passed on as an inheritance; however, an increasing number of people are tapping into some of this wealth to help boost their retirement finances. After years of working hard to make monthly mortgage repayments, your home is likely to be your biggest asset, particularly if you’ve benefitted from an increase in house prices over the last few decades.
An alternative way to release the equity in your home would be to sell it and downsize. However, leaving the family home isn't something everyone wants to do. And with people living longer and pensions typically not being what they once were, for many, savings have to stretch a lot further to last throughout retirement. That's why tens of thousands of people are already enjoying the benefits of unlocking some of the cash from their home through equity release. But at Key we know it’s not suitable for everyone, which is why it’s important to get expert advice before you make a decision.
4
Lifetime mortgage A lifetime mortgage gives you access to some of the tax-free cash tied up in the value of your home while allowing you to retain full ownership. It’s a loan secured against your property, and to be eligible, you need to be aged 55 or over and your property needs to be worth at least £70,000. Payment-term lifetime mortgage A payment-term lifetime mortgage could allow you to unlock more of your home’s value than a lifetime mortgage. In return, you must make monthly repayments until you, or the oldest applicant, turn 66. It’s a loan secured against your home, only available to people aged 55–62 at the outset, and your property needs to be worth at least £125,000. A payment-term lifetime mortgage is subject to an affordability check and your home may be repossessed if you don't keep up with mandatory payments. Interest-payment lifetime mortgage When you release cash through an interest-payment lifetime mortgage, you agree to make monthly interest payments of between £25–100% of the interest added to your loan each month to help reduce your total cost of borrowing. If you’re able to make full interest payments for the life of your plan, it’ll leave you with only the amount borrowed to pay at the end. An interest-payment lifetime mortgage isn’t subject to affordability tests, however, agreed payments must be sustainable as there may be a penalty for stopping payments early. Home reversion With a home reversion, you sell all or part of your property to a reversion company in exchange for a cash lump sum, with no interest to pay on the money released, and no monthly payments to make. When the plan comes to an end, the home reversion provider takes its percentage share of the sale proceeds. You need to be 65 or over. Available through Key Group If another product is more suitable, we'll refer you to a different adviser within Key Group who can help. If you go ahead, you'll only be charged the same £1,299 advice fee you’d pay with Key, even if their fee is usually higher. Types of equity release There are four different ways to unlock some of your home's value, tax-free, through equity release. At Key, our equity release advice only relates to our lifetime mortgages, payment-term lifetime mortgages and interest-payment lifetime mortgages. However, if your Key adviser believes an alternative equity release product is more suitable, we'll refer you to another specialist within Key Group who'll search the whole market to find the right plan for you.
5 Get advice today 0800 294 3171
“Equity release allowed us to stay in our home and pay off our existing debts”
Mrs Fitzgerald, a nurse, and her husband, Paul, a self-employed carpenter bought their London home 22 years ago for £76,000. It has been their biggest investment, increasing in value by £349,000 since. Having taken out an interest-only mortgage, they thought they would be able to pay it off. In addition, the couple had also amassed £25,000 of credit card debt. “It was getting nearer to the end of our mortgage term and I was worrying about how we were going to pay off the £75,000 left as well as the credit card debt. We put our house on the market, but we couldn’t find anything we liked. We liked our house and the local area. This is why we looked into equity release. It allowed us to stay in our home and pay off our existing debts. We were visited by a Key adviser who gave us all the information we needed. We discussed our options and agreed on a plan suitable for us. Within five weeks it was complete.* For us, equity release was the answer.”
*Typical time to completion 8–12 weeks
6 Get advice today 0800 953 3743
Benefits and drawbacks of lifetime mortgages and payment-term lifetime mortgages Like any financial product, equity release has benefits that are designed to help you, but also has drawbacks which are important to consider.
The interest can build up quickly Lifetime mortgages and payment- term lifetime mortgages are loans secured against your home and are subject to compound interest, meaning the amount you owe can grow quickly (see page 14 for an explanation of compound interest) Mandatory payments There’s a period of mandatory payments with a payment-term lifetime mortgage, and your home may be repossessed if you don't keep up with these payments Reduced or no property equity Equity release may leave you with limited or no property equity remaining and will reduce your financial options in the future Effect on estate & means-tested benefits Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits Long-term financial product These are long-term financial products and are not designed to be repaid early. If you do, early repayment charges may apply
Tax-free cash You can unlock cash from your home, tax-free, to help meet your needs in later life Stay in your home With a lifetime mortgage and payment- term lifetime mortgage you'll always own your own home and have the right to stay in your property for as long as you wish, however, with a payment- term lifetime mortgage you must ensure all mandatory payments are met Reduced or no monthly repayments You can make reduced or no monthly repayments with a lifetime mortgage. This is the same with a payment-term lifetime mortgage after the oldest applicant turns 66, and overpayments can be made at any time, subject to criteria No negative equity guarantee You’ll never owe more than your home's worth or pass on any equity release debt to your family, providing you keep to the terms of your plan You can still move house You have the right to move home in the future, subject to criteria
7 Get advice today 0800 294 3171
What other options are there? If an alternative later life mortgage is right for you, we’ll pass you over to another specialist adviser within Key Group who’ll search the whole market to find the right product for your circumstances. Here are some examples of different products and solutions that may be right for you: Later life residential mortgage If you think you’re too old for a standard mortgage or can’t find a conventional one to meet your needs, we can refer you to our expert mortgage advisers to help. Mortgages can be used to buy a new property, remortgage an existing one, or release additional funds. It can be on a capital repayment or interest-only basis.* Available through Key Group Retirement interest-only mortgages A retirement interest-only mortgage (RIO) is a mortgage where you pay the interest every month until the plan ends. The original loan amount is repaid when the plan comes to an end, which is usually when you (or the last remaining applicant) either pass away or move into long-term care. A RIO is typically available to people aged 55 or over.* Available through Key Group If another product is more suitable, we'll refer you to a different adviser within Key Group who can help. If you go ahead, you'll only be charged the same £1,299 advice fee you’d pay with Key, even if their fee is usually higher.
* Remember a mortgage is a loan secured against your home. Your home may be repossessed if you don't keep up repayments. Credit and affordability tests apply.
8
Further options explained
Downsizing By selling your home and moving to a smaller or less expensive property, you may be able to generate a cash lump sum to help boost your finances in later life. This can be a viable alternative to borrowing against your property; providing you have an appetite for the housing market and aren’t looking to remain in your current home. Unsecured borrowing Typically, through an unsecured loan, you can borrow from £1,000 up to £25,000. The term of the loan and the monthly repayments are usually fixed. So, if you make all the required payments, the loan is guaranteed to be repaid at the end. Using existing assets If you’re able to use any existing assets to help meet your needs throughout later life, such as a pension or savings, your adviser will always recommend you do so before considering property and non-property-based borrowing. Grants and benefits Grants and benefits may be available to those on a low income who need help with a one-off expense or general living costs. There’s an extensive range of financial support available for many needs, such as housing costs, cost of living, and pensions. turn2us.org.uk is a national charity that can help you understand which grants and benefits may be suitable for you. Support from friends and family Could a friend or family member provide the financial support you need? Or are you expecting to receive an inheritance windfall in the future that could help you meet your needs? Although it could be a tricky conversation to tackle, receiving support from family or friends will likely be a much cheaper option than borrowing against your home or moving.
For more information on all your other financial options in later life, download Key’s free guide.
9 Get advice today 0800 294 3171
Is equity release right for me? At Key, we understand that equity release isn’t suitable for everyone. That’s why we’ll always be honest and tell you if we don't believe it's the right option for you. To help, we’ve highlighted a selection of scenarios below where equity release could be the right option for your needs, and when it’s not. Your specialist Key equity release adviser will work with you to determine whether a lifetime mortgage, payment-term lifetime mortgage, or an alternative form of later life finance is most suitable for you during your initial advice appointment.
Examples of when equity release could be the right option I want or need to clear my existing mortgage I want to boost my finances and stay in the home I love I want or need to give my family a financial gift I want or need to make home and or garden improvements to make my property more comfortable in later life My retirement income is not sufficient to make the most of later life My health is declining and I need help with everyday care
Examples of when equity release isn't the right option I don't want to take the risk of being left with limited or no property equity remaining I’m able to afford an alternative product that would reduce my cost of borrowing I need to borrow less than £10,000 I’m not willing to repay any existing mortgage secured against my home I want to use the money for gambling or short-term borrowing needs I want to use the money for investment or business purposes
10
How would you spend your tax-free cash? If you’re considering releasing a cash lump sum, you’ve probably already got an idea of how you want to spend it. Here are some of the ways you could spend the money you access through later life finance.
Paying off an existing mortgage
Gifting money to family
Going on holiday
Clearing existing credit cards and loans
Replacing the car
Making home and garden improvements
Things to consider You should always think carefully before securing a loan against your property to repay existing debt.
11 Get advice today 0800 294 3171
How much could I release with a lifetime mortgage? If your adviser considers a lifetime mortgage as the most suitable option for you, you may be able to unlock thousands in tax-free cash from your home’s value. The amount you can release depends on your age and how much your home is worth. On average Key customers released 23%* of their property value in the first half of 2023. Generally, the older you are, the more you can release. This map shows the average release amount by region. *Key H1 Market Monitor, 2023
£65,482
£51,815
£58,889
£62,124
£61,795
£68,469
£74,438
£63,664
£61,989
£166,162
£95,692
£83,878
Calculate how much you could release for free using our simple equity release calculator
Laura, here's your personalised Key equity release
You could release, tax-free... Standard £115,999 Minimum £10,000
12
“I definitely felt I made the right decision and the whole process was spot on”
Sandra Eke, from Sidcup, South East London, enjoys an active lifestyle and after a career change she doesn’t plan on retiring anytime soon. Sandra decided to look into equity release as a way to help her daughter and three grandchildren to find somewhere to live. “I spent six months researching the idea before I made the decision to book an appointment with a Key adviser. She was honest and I felt that she looked after my needs. The whole process was a lot easier than I’d expected it to be.” When the money arrived in Sandra’s account, the first thing she did was help her daughter and three grandchildren to find a home, paying the first 12 months’ rent upfront. Sandra explained, “I’ve decorated throughout the house, had a new kitchen and bathroom fitted and rather than do it myself, I paid for someone else to do it. I was also able to take one of my grandchildren to Tenerife to visit my sister who lives over there. I’ve already recommended equity release to some of my friends – in my view, you should enjoy the money whilst you’re still alive. I definitely felt I made the right decision and the whole process was spot on.”
Get advice today 0800 294 3171
13
Compound interest explained Unless you choose to do so, there are no repayments to make on a lifetime mortgage until the plan comes to an end. As a result, a lifetime mortgage is subject to compound interest. Compound interest is different to the interest added to a residential mortgage or personal loan. How does it work?
interest already accrued), not just the amount you initially borrowed. This means a larger amount of interest is added to your lifetime mortgage every period. And this cycle continues until the plan ends. Without making payments, this can significantly reduce the equity remaining in your home and leave you with limited financial options in the future. This could mean you're unable to remortgage to a cheaper product in years to come, reduce your ability to privately fund any future care costs, or restrict your options to move home in the future.
With a lifetime mortgage, interest is added either monthly or annually depending on your plan. During that first month or year, interest is charged and added to the amount of money you’ve borrowed, otherwise known as your initial loan amount. The amount of interest added will depend on your initial loan amount and interest rate. If you’ve had a residential mortgage or personal loan in the past, you’ll know the interest added is based on the amount you originally borrowed. But with a lifetime mortgage, that’s not the case. Instead, the interest is calculated and charged on what you owe (your initial loan amount plus the
An example of how compound interest accrues over 20 years Balance at the start of year Interest (6.3% MER) 1 Balance at the end of year 2
Remaining property equity 3
£82,475 £87,824 £93,519 £198,778 £272,153
£5,349 £5,695 £6,065
£87,824 £93,519 £99,584
£200,176 £194,481 £188,416
Year 1 Year 2 Year 3
This cycle continues for the life of the plan
£12,891 £17,649
£211,669 £289,802*
£76,331
Year 15 Year 20
£0
This example is for illustrative purposes only and uses the average release amount of £82,475 and monthly equivalent rate (MER) of 6.3% – Key Market Monitor H1, 2023. Average UK house price of £288,000 – ONS, August 2023. 1. Interest rate: The rate at which interest is applied to the loan – in this case, monthly (MER). With all Key lifetime mortgages, your interest rate is fixed for life. This column shows how much interest has been added to the loan that year 2. Balance at the end of the year: How much is owed at the end of the year, including compound interest 3. Remaining property equity: The difference between how much your property is worth and the outstanding balance of your lifetime mortgage * Although the balance at the end of the year is higher than the property's value, you'll never owe more than your home's worth with a Key lifetime mortgage thanks to the no negative equity guarantee. Read more about this on page 25.
14
The table shows the impact compound interest has on a lifetime mortgage if you choose not to make repayments. In this scenario, the customer has released £82,475 from their £288,000 home. Their lifetime mortgage accrues £5,349 of interest in the first year. In year 2, as interest is charged on the outstanding balance (£87,824), not the initial loan amount (£82,475), £5,695 is accrued in interest – £346 more than in year 1. In year 3, £6,065 is added in interest – £370 more than in year 2 and £716 more than in year 1. This cycle then continues for the life of the plan, which is usually until you or the last remaining applicant passes away or moves into long-term care. Thinking about the future With a lifetime mortgage, interest is added to the loan until it’s repaid. If you choose not to make any payments towards the balance, your remaining property equity will reduce quickly.
For example, in the scenario above, the customer has over £188,000 in property equity after three years. But that reduces to less than £77,000 by year 15. And by year 20, the customer has no property equity remaining – although the customer will never owe more than their home's worth as a result of the no negative equity guarantee. By not making payments towards your lifetime mortgage, you not only reduce the value of your estate, but also restrict your financial options in the future; with less equity to draw from should you need it. With that in mind, it’s important to consider both your current and long-term needs and circumstances before choosing whether to go ahead with equity release. And if you decide a lifetime mortgage is right for you, it’s always recommended to make payments towards your loan to help reduce the impact of compound interest. You can read more about how to reduce the cost of your lifetime mortgage on page 22.
15 Get advice today 0800 294 3171
Lump sum vs drawdown With a Key lifetime mortgage, there are two ways you can access your tax-free cash. One is taking all of the money in one go; known as a lump sum, and the other enables you to take it in chunks as and when you need it, following an initial release. This is
known as a drawdown lifetime mortgage. How a drawdown lifetime mortgage works A drawdown lifetime mortgage offers more freedom than a lump sum plan, allowing you to release money when you need it. Firstly, you agree an overall sum of money you can borrow. You then take an initial sum and have the option to release further amounts when needed, subject to a minimum release.
Things to consider Your lender may have the option to withdraw the additional borrowing facility and if you choose to make a drawdown, the funds will be subject to the prevailing, fixed interest rate at the time. This new rate may differ from your original interest rate. Benefits of a drawdown lifetime mortgage More flexibility Release funds from your cash reserve as you need it. This gives you the freedom to use as little or as much as you want depending on your circumstances at the time, subject to criteria. Smaller impact on benefits Because you’re in control of when you release the money, you can organise drawing down funds in a way that will help reduce the effect on any means- tested benefits. Less interest to pay Interest only accrues on the funds you draw down once they’re released, so you’ll have less of it to pay. Plus, no interest accumulates while your funds are still sitting in the reserve.
Benefits of a lump sum lifetime mortgage Lower interest rates
Lump sum lifetime mortgages sometimes come with a lower rate of interest compared to a drawdown lifetime mortgage. Interest rates don’t change When you release further funds from your drawdown lifetime mortgage, the money released is subject to the prevailing interest rate at the time. With a lump sum lifetime mortgage, however, your interest rate is fixed for the entirety of your plan. Taking all your available cash in one go will limit your future borrowing options. As interest accrues on the full amount taken from day one, the amount you owe will increase faster.
16
Example of how a drawdown lifetime mortgage could reduce your cost of borrowing Mrs Lewis and Mr Davies both want to release £81,703, but opted to take it out in different ways to meet their requirements.
£81,703 TOTAL BORROWING AMOUNT Lump sum case study
Drawdown case study
£51,703 INITIAL BORROWING
£15,000 YEAR 10
£15,000 YEAR 5
£81,703 TOTAL BORROWING AMOUNT
Mrs Lewis Mrs Lewis decided to take out all her money in one go through a lump sum lifetime mortgage. As interest is charged on the full release amount from day one the total cost of borrowing after 15 years could be £223,915 (based on a monthly rate of 6.74%) on her loan of £81,703.
Mr Davies Mr Davies decided to take out an initial loan of £51,703 to meet his immediate requirements, then make two further £15,000 drawdowns over time (year 5 and 10). As he took out his money in stages, his total cost of borrowing was lower as interest is only charged when the funds were released.
Total cost of borrowing after 15 years £223,915
Total cost of borrowing after 15 years £191,064
Over the same 15-year period, borrowing the same amount of money, Mr Davies saved almost £32,851 in interest charges compared to Mrs Lewis.
This example is for illustrative purposes only and uses the average release amount of £81,703 and monthly equivalent rate of 6.74% (future drawdowns will be charged at the prevailing interest rate) – Key Market Monitor Q1, 2023.
17 Get advice today 0800 294 3171
Payment-term lifetime mortgage A payment-term lifetime mortgage is a type of equity release that could allow you to release more tax-free cash at a lower rate of interest than you would otherwise be able to through a lifetime mortgage. In return, you commit to a period of mandatory payments which lasts until your, or the oldest applicant’s, 66th birthday.
Is a payment-term lifetime mortgage right for me? A payment-term lifetime mortgage is available to customers aged 55-62 at the outset, with a property value of £125,000 or more. It could be the right solution for you if you need access to a tax-free lump sum and you’re able and willing to make mandatory payments, as you’ll need to pass an affordability check to take out a plan. There's no drawdown option with a payment- term lifetime mortgage. Read more about drawdowns on page 16. How much extra cash could I release? The amount of extra tax-free cash you could release depends on how much you need to borrow and your affordability. But by committing to a period of mandatory payments, you could unlock up to 8% more of your home's value, tax-free. In an average UK property, that's worth more than £23,000, which could be the difference in you meeting your later life finance needs, such as repaying your existing mortgage, or not.
After that point, you don't need to make any mandatory payments. And while we always recommend repaying what you can to help manage your total cost of borrowing, even if you choose to make no repayments at all, you'll retain full ownership of your home and can continue to stay in it for as long as you wish. A payment-term lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly. Your home may be repossessed if you do not keep up with mandatory payments.
18
How a payment-term lifetime mortgage could work for you
CASE STUDY EXAMPLE Release more tax-free cash from your home Stephanie Higgins, aged 55, is a divorced nurse from Shropshire. She has an outstanding mortgage of £78,000 she wishes to repay. Stephanie tried to release equity previously but found she wasn't able to unlock enough money from her home to meet her needs. However, thanks to Key’s payment-term lifetime mortgage, that’s about to change.
Illustrative example
Lifetime mortgage 2
Payment-term lifetime mortgage 3
£286,000 £60,060
£286,000 £78,650
House value
Maximum release 1
6.83% MER
6.83% MER
Interest rate
£200 (Until Stephanie's 66th birthday, then £0 after)
Mandatory monthly payment
£0
Payment-term lifetime mortgage arrangement fee of £999 not included in calculation. With a lifetime mortgage, Stephanie is only able to release just over £60,000 from her £286,000 home. This leaves Ms Higgins a little under £18,000 short of the money she needs to clear her existing mortgage. However, with a payment-term lifetime mortgage, by committing to making mandatory payments of £200 until Stephanie's 66th birthday, she can release a further £18,590 – which gives Ms Higgins the money she needs to clear her existing mortgage. Throughout her payment-term lifetime mortgage, Stephanie can make voluntary ad-hoc or regular overpayments of up to 10% of the initial loan amount each year without incurring an early repayment charge to help manage her total cost of borrowing, but there are no mandatory payments after she turns 66. Case study example. (1) The amount of tax-free cash this customer can release from their home through a comparable lifetime mortgage. We always recommend only releasing what you need. (2) Flexi Choice. (3) Flexi Choice payment-term lifetime mortgage. Interest rates are for illustrative purposes only. Speak to a Key adviser for a personalised illustration. You may be able to release a higher amount with an alternative lifetime mortgage; however, the total cost of borrowing may be significantly more.
19 Get advice today 0800 294 3171
Interest reward lifetime mortgage Save thousands in interest over the life of your plan by making interest payments, helping you reduce your total cost of borrowing and giving you more control over your financial future. With an interest reward lifetime mortgage, you could receive an interest rate discount by making monthly interest payments. The longer you commit to making payments, and the more interest you pay, the bigger the discount. How does it work?
You could discount your interest rate with us by taking an interest reward lifetime mortgage. The discount that you get will depend on the amount you want to borrow compared to the value of your house, how much interest you can pay each month and whether you want to make payments
for 5, 10 or 15 years. The combination of making payments and the reduction in interest rate could help you save thousands – even with a small discount on your interest rate. Your adviser can give you an illustration of what discount you could get and how much it could save you.
20
How an interest reward lifetime mortgage could work for you
CASE STUDY EXAMPLE Save thousands in interest charges Marge is a 71-year-old divorced retiree looking to release £100,000 from her £600,000 property to gift money to her grandchildren and help making some home and garden improvements.
By committing to paying 100% of the monthly interest for 10 years, Marge is rewarded with a 0.30% interest rate discount. Through this interest rate discount, and by paying monthly interest payments for 10 years, Marge can save more than £116,000 over 20 years compared to making no repayments through the same standard lifetime mortgage.
Interest Reward Lifetime Mortgage
Lifetime Mortgage
Initial loan amount
£100,000 6.5% MER*
£100,000 6.2% MER*
Interest rate
£532 (for 10 years) (100% of the monthly interest) £249,436 (inc. payments)
Monthly payments
£0
Total cost of borrowing after 20 years
£365,645
Net saving
£0
£116,209
*Monthly Equivalent Rate. Interest rates, monthly payments and savings amounts are for illustrative purposes only. Interest rate received and plan features are subject to eligibility. Ask your adviser for a personalised quote.
21 Get advice today 0800 294 3171
How can I reduce the cost of my lifetime mortgage?
All of Key’s plans come with options to help reduce the total cost of the borrowing if that’s important to you; for instance, if you wish to leave a larger inheritance. Making repayments Even though there are typically no monthly
your total cost of borrowing would be £223,915*. However, by making a monthly £250 repayment, after 15 years, you’d owe £146,440 – with a total cost of borrowing, including repayments, of £191,440. This means, by repaying £250 a month, you, and your beneficiaries, could benefit from a £32,475 net interest saving.
repayments to make with a lifetime mortgage, all our plans come with the option to make ad-hoc or regular repayments to help reduce your total cost of borrowing. Even if you’re only able to make small repayments, it will help reduce the amount of interest you pay over the lifetime of your loan. In this example, if you were to borrow £81,703 and make no repayments at all, after 15 years,
How making repayments can help you manage your total cost of borrowing
Total cost of borrowing making no repayments would be £223,915
Total cost of borrowing repaying £250/month would be £191,440 Net interest saving of £32,475
— £142,212
Interest accrued
— £81,703 Initial loan — £64,737 — £45,000
Repayments made
Interest accrued
— £81,703 Initial loan
Initial release amount of £81,703**. Plan subject to a fixed interest rate of 6.74%** MER. Interest and repayments shown over a 15-year period. *Based on a fixed 6.74% MER (Monthly Equivalent Rate) interest rate. **Key Market Monitor Q1, 2023
22
Other ways to reduce the cost of your lifetime mortgage However, if you are unable to make repayments towards your lifetime mortgage, there are other options that could help to manage the size of your loan. Consider a drawdown plan
to secure a lower rate. By paying a lower interest rate, you can reduce your total cost of borrowing. However, a reduction in interest rates in the future isn’t guaranteed. It’s also important to remember that an early repayment charge (ERC) may be payable if you choose to remortgage your equity release plan. However, all our plans come with fixed ERCs, meaning they expire after a certain amount of time. Your Key equity release adviser can explain this in more detail to you.
With a drawdown lifetime mortgage, you only take out the money you need when you need it. This can help reduce your total cost of borrowing, as interest is only charged on the money you release, rather than the full amount available. You can read more about this on page 16. Remortgage to another equity release plan in the future If interest rates reduce in the future, you may have the option to remortgage your current plan
Flexible features for personalised plans Here’s an overview of the flexible features available with our lifetime mortgages, specifically designed to help put you back in control of your later life finances. Lump sum or drawdown
Downsizing protection If, for any reason, you need to move home after five years of taking out a lifetime mortgage, you can pay the loan back early without incurring an early repayment charge if the new property doesn’t meet your plan’s criteria. This is available from day one with an interest reward lifetime mortgage. Early repayment charges All our plans have fixed early repayment charges, so you’ll always know what the charge will be should you wish to repay your loan early.
Choose to release a lump sum of tax-free cash or take out an initial amount and draw down money in stages. With a drawdown, you only ever pay interest on the portion of your facility
that you have withdrawn. Optional repayments
With a lifetime mortgage, there are typically no monthly repayments to make, as the loan, plus roll-up interest, is repaid when the plan comes to an end. However, there are benefits to making repayments if you can afford to do so. Partial capital repayments Make voluntary, ad-hoc repayments up to 10–12% of the initial amount you’ve borrowed each year (without incurring an early repayment charge) and reduce the size of the loan on which interest is charged.
23 Get advice today 0800 294 3171
Considering the impact of house prices If you’re considering equity release, it’s important to consider the value of your home now and in the future, as it will affect any potential inheritance you want to pass on.
Over the last few decades, average UK house prices have risen steeply; more than doubling in the last 20 years. If you take a lifetime mortgage and house prices continue to rise, you may build up more equity to leave to your loved ones, as the plan continues over time. Please remember that compound interest will continue to accrue over the term of the plan.
However, it’s also important to understand that house prices may fall during the life of your plan, which would reduce the amount of inheritance remaining. But we can recommend a lifetime mortgage where you never owe more than your home’s worth or pass on any equity release related debt to your loved ones. There’s more information available about the no negative equity guarantee, and others, on page 25.
DAY ONE
AFTER 15 YEARS
Lifetime mortgage
Lifetime mortgage + interest
— £197,888
Equity remaining in your home
— £281,616
Equity remaining in your home
— £223,914
Lifetime mortgage plus interest
— £81,703
Lifetime mortgage
Property value £363,319
Property value £421,802
House price growth can help build further equity in your property which can be passed on as an inheritance or accessed again in the future through equity release.
This example assumes a fixed interest rate of 6.74% MER (Monthly Equivalent Rate) and house price inflation of 1%. Please note that these are only examples and the value of your house could go down or not increase at the same rate. Lifetime mortgage amount and property value are based on the average values in Q1 Market Monitor 2023.
24
Is equity release safe? Yes, all Key Later Life Finance equity release advisers have specialist qualifications and you can only take out equity release if you’ve received advice from a qualified adviser. It’s important you get that support to help you make the right choice.
As an extra safeguard, we’re a member of the Equity Release Council (ERC) and recommend lifetime mortgages and payment-term lifetime mortgages that meet ERC standards.
We recommend lifetime mortgages and payment-term lifetime mortgages that meet Equity Release Council standards and come with the following guarantees: Stay in your house You'll retain full ownership of your home and can stay in it for as long as you wish* You can still move home You have the right to move home in the future, subject to criteria No negative equity guarantee You'll never owe more than your home's worth or pass on any equity release related debt to your family, provided terms and conditions are met Fixed interest rate Your interest rate is fixed for the life of your loan, so you’re protected against any future rate rises Flexible payment options There are typically no monthly repayments to make with a lifetime mortgage, but you have the right to make voluntary payments without incurring an early repayment charge, subject to lending criteria. With our payment-term lifetime mortgage, you make mandatory payments* until the oldest applicant turns 66, however, after that you can make reduced or no monthly payments and overpayments can still be made at any time, subject to criteria Things to consider It’s important to remember that a lifetime mortgage and payment-term lifetime mortgage may leave you with limited or no property equity remaining and they'll reduce your financial options in the future. Lifetime mortgages and payment-term lifetime mortgages are loans secured against your home and are subject to compound interest, meaning the amount you owe can grow quickly. *There’s a period of mandatory payments with a payment-term lifetime mortgage, and your home may be repossessed if you don't keep up with these payments. Equity Release Council guarantees
25 Get advice today 0800 294 3171
Can I tailor my lifetime mortgage? Our range of lifetime mortgages enable you to personalise the features and protections of your plan so you can live the later life you want. Equity release can only be taken following qualified advice and your equity release adviser will talk you through the features available based on what you’d like to do. Don’t forget, some of these features may be available on other products, and your Key adviser will talk you through your options as part of your advice journey. What’s important to you? Key lifetime mortgage feature I’d like to reduce the size of the loan on which the interest is charged Partial capital repayments I want to take some money now and come back for more at a later date Drawdown I’d like to be able to move home if my circumstances change Porting, subject to criteria I want to take all my money in one go Lump sum It’s important I always remain the owner of my home Key lifetime mortgage I don’t want to ever owe more than my home is worth Key lifetime mortgage If I do choose or need to repay my loan early, I’d prefer to have fixed early repayment charges that I know in advance Any Key lifetime mortgage I want to pay some or all of the monthly interest Key interest reward lifetime mortgage
Get advice today 0800 953 3743
26
We’ll support you through the equity release process, step by step Speak to an expert A specialist will answer initial
1
questions you might have and arrange a consultation with a local, expert equity release adviser
Talk to your family We encourage you to discuss equity release with your family and invite them along to appointments
2
First appointment A dedicated adviser will discuss the options available and find out more about your particular circumstances and requirements
3
1
Finding the right plan Should you decide to proceed, your adviser will search our range of lifetime mortgages and payment-term lifetime mortgages to find the most suitable one for you Starting the paperwork Should you decide to proceed, the paperwork will be submitted and your property will be valued by an independent surveyor
4
Second appointment Your adviser will present their recommendation and answer any questions you may have. Your adviser will also provide a personalised illustration Offer issued You’ll be issued with an offer following a satisfactory valuation including full terms and conditions of your plan for your approval
5
2
6
7
Legalities Independent solicitors acting on your behalf will cover the legal aspects
8
Complete in 8–12 weeks Although a timescale can’t be guaranteed, this is the typical time it takes from application to completion
9
Money released Time to start enjoying the money released
10
27 Get advice today 0800 294 3171
What are the most commonly asked questions about equity release? Is equity release regulated?
original loan amount itself, but also on the interest that’s already been added. You can read more about this on page 14. What do people usually use the money for? Key customers spend the tax-free cash they release on many different things – some of the most popular are home improvements, repaying existing debts and clearing an existing mortgage. Can I take out equity release if I still have a mortgage? Yes; however, you’ll need to repay the mortgage using the money released. Any funds left over are yours to enjoy. What happens when I pass away? Your home will usually be sold once you and your partner either pass away or move into long-term care. The sale proceeds will be used to repay the amount you owe, and any money left will go to you or your estate. How is my home’s value assessed? Your property will be valued by an independent RICS registered surveyor so you can be confident of an unbiased opinion of your property’s worth, for mortgage purposes. How much does your advice cost? You can find out if a lifetime mortgage or payment-term lifetime mortgage is right for you without it costing you a penny by talking to one of our expert advisers. All our equity release advice relates to our range of Key lifetime mortgages and payment-term lifetime mortgages only, and our fixed advice fee of £1,299 is only payable on completion.
Yes, equity release is regulated by the Financial Conduct Authority (FCA). Expert advice is also required before you can take out a plan. Will I still own my home? With a lifetime mortgage and payment-term lifetime mortgage you'll always own your own home and have the right to stay in your property for as long as you wish, however, with a payment-term lifetime mortgage you must ensure all mandatory payments are met. Will I ever fall into negative equity? All our plans meet Equity Release Council standards and come with the no negative equity guarantee, meaning you'll never owe more than your home's worth providing you keep to the terms of your plan. However, both a lifetime mortgage and a payment-term lifetime mortgage may result in limited or no property equity remaining and will reduce your financial options in the future. Can I move house? Yes, your plan can be transferred to a new home (subject to criteria). Who handles the legal side of the process? An independent solicitor will need to be appointed to handle the legal side of the process for you. We want to make sure you’re comfortable with your decision, so can suggest solicitors with lifetime mortgage experience if you prefer. What is compound interest? All our plans are subject to compound interest. That’s where you pay interest not only on the
If another product is more suitable, we'll refer you to a different adviser within Key Group who can help. If you go ahead, you'll only be charged the same £1,299 advice fee you’d pay with Key, even if their fee is usually higher.
28
Wills & lasting powers of attorney As you enter later life, your mind may turn to who you want to inherit your estate when you’re gone or ensuring you’re taken care of if you’re no longer able to do so yourself. With the Wills and lasting powers of attorney available through Key, you can take control of your future and beyond, and ensure those around you know exactly what you want. Our estate planners are fully qualified and members of The Society of Will Writers. They’ll listen to your wishes and provide sound advice on what’s best for you and your loved ones in the future, so you can take comfort your affairs are in order and concentrate on enjoying your later life. If you wish to add any estate planning fees to your equity release loan, these will attract compound interest.
Wills A Will is a legal document that allows you to express your wishes about the people you want to inherit your money, property and possessions after you’ve passed away. Without one, the rules of intestacy will decide who inherits your possessions, property and money.
Lasting power of attorney A lasting power of attorney (LPA) is a legal document that gives the person(s) of your choice the power to deal with your affairs. These trusted people will be able to use these documents to act on your behalf whenever necessary. They’re important in the event that you may not be able to express how you want your property and financial affairs and/or health and welfare to be taken care of.
29 Get advice today 0800 294 3171
Why choose Key? Key is a specialist later life finance company focusing solely on the over 55s. We provide expert advice, innovative later life mortgage and estate planning products, planning tools and personal support so you can realise your potential in later life. Specialist We have more than 25 years’ experience helping over 55s with tailored financial advice on a range of later life products designed specifically to help put you back in control of your finances. Personal Our expert advisers take the time to understand your needs before making a recommendation that’s personal to you. We always act in your best interests, and if our later life mortgage products aren’t right for you, we’ll tell you. Supportive We’ll give you all the information you need to make smart, well-informed decisions about your later life finances in your own time. And if you do choose to go ahead with any of our products, we’ll support you throughout the entire process, answering any questions you have at every step. Key, for the life in later life
One of the UK’s largest network of later life finance specialists
25 YEARS
Key has more than 25 years’ experience helping over 55s with specialist advice
Modern, competitive-rate lending products with flexible features
A personal case handler who’ll take care of all the paperwork for you
Award-winning customer service
Specialists in advice and products for 55s or over
30
Award-winning As a company established for over 25 years, we have won over 80 industry and consumer awards
Mortgage Strategy Awards 2023 Best Equity Release Broker
Financial Reporter Awards 2022 Best Later Life Broker
Personal Finance Awards 2022 Best Equity Release Adviser
Supportive Key Group has helped more than 1 million people decide if equity release is right for them and supported over 185,000 customers unlock in excess of £12bn from their homes to help boost their later life finances
We’re the UK’s most trusted equity release provider with more 5-star reviews than anyone else
Dementia Friends Key is committed to supporting vulnerable customers and is a Dementia Friend
31 Get advice today 0800 294 3171
Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32Made with FlippingBook. PDF to flipbook with ease