Why Is It Necessary To Take Advice About Equity Release?
Equity release schemes help you to access the value of your property in order to secure extra money for your retirement. These kind of plans are increasing in popularity because the entire process of securing a loan based on the money in your property is very easy.
Equity Release Advisers
Equity Release advisers are trained to help you understand all the advantages and disadvantages of different schemes. They must be qualified to give advice, and authorised by the Financial Conduct Authority.
Why Should You Opt For Equity Release?
If you are retired and are not planning to move into a long-term care facility, then an equity release plan can help secure your financial position if the correct advice is followed. All you need is your own house which is in a reasonably good condition and no mortgage or a very small amount outstanding.
The equity release schemes are usually of two types: lifetime mortgage and home reversion plans. Each of them provides you with the option of taking a lump sum amount or regular payments based on the value of your house. The money is paid to you tax free but you may be liable for income tax; and you may lose some of your state benefits – and this is why you should always take qualified advice from an adviser.
Lifetime mortgage schemes charge compounded rates of interest on the amount you have borrowed. You do not have to pay anything until you die or sell the house.
Home reversion plans give you the option of either selling your whole house, or a part of it, to a financial company – usually a specialist property company. Once there has been a transfer of ownership, you will receive the agreed amount of money. The home reversion company provides you with a lifetime lease and hence you can stay in the house by paying no rent or a nominal amount called a ‘peppercorn’ rent. When you move out to a long-term facility or in case of your death, the reversion company will sell the house and take their share from the sale proceeds.
Equity Release and Your Age
The higher your age, the higher the benefit you can enjoy from these plans. Your health condition also has an effect on the amount of money you can receive from the scheme; people with lower life expectancy gain more as the lending company has to tolerate less risk and can recover the money they have loaned more quickly.
Is Equity Release Plan Suitable For You?
The suitability of equity release plans varies from person to person because of different circumstances and monetary requirement of the individuals concerned.
If you opt for any of the equity release schemes then they ensure your financial security by giving you a steady flow of income or a lump sum amount without relinquishing your rights to continue living in your home.
However, there are a few caveats which your adviser has a duty to discuss with you when you are considering releasing money. When you are opting for any equity release plan, it may have an effect on the means-tested benefits which you get from the state. Sometimes it happens that your lender may give you an amount far less than the market value of the house.
It is necessary that you discuss the alternative options with your financial adviser and anybody who may benefit from the inheritance which you will leave after your death.