Equity Release Advice

    Equity Release Advice

    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.

    Can Equity Release Solve Retirement Money Problems?

    Can equity rlease solve retirement money problems?

    At the first look, equity release seems to be the solution to all your old age money problems. You get money against your house with no repayments to be made. And you get to live in the house too.

    But you should not be blinded by the benefits. You need to get the whole view. Only then will you be able to get the best out of it. You should gather all the information you can about it and only then make the decision when you have all the details to hand and can fully understand your decision. You will find most of that information here.

    An Overview

    This scheme allows you to get a certain amount of money depending on the value of your house, for as long as you are living in that house. You can get the amount as lump sum or in the form of regular payments. The money will be repaid, along with all the interest only after you stop using the property. That happens after you die or move to a full time care.

    There are two forms of equity release. You can either take a mortgage on the house or sell it. These plans have few little differences. You can select the one that suits you. More than 90% of the people however go for the mortgage option.

    The right scheme?

    To get most of the benefits and least of the drawbacks of this scheme, you need to find the right lender. There are dozens of finance companies that provide this plan and they all offer plans with subtle differences such as different rates of interest, etc.

    The debt in these schemes grows very rapidly and so you should try to keep the interest rate as low as possible.  The rate of interest you receive depends on many different things – one of them is your age. It can also be negotiated in some cases. You should talk to a financial adviser before taking any decisions.

    Conclusion

    The question is not whether equity release is right or not – it is whether the scheme is right for you or not. Once you have taken money against your house, moving out becomes very difficult. You will first have to clear the debt so, if you are thinking of taking out this scheme, you should make sure that moving out is not your future plan.

    You should also take a look at other options that are available. You need to make sure this is the right thing to do.

    Roll-Up Lifetime Mortgages

    Lifetime Mortgage Drawdown

    Roll up Lifetime mortgages are specialist mortgages for people aged 55 or more who want to release some of the equity in their property without having to make monthly repayments. These schemes are designed to enable you to retain full ownership of your property whilst benefitting from cash that is provided to you from a loan that is secured against it. You do not have to make any monthly repayments like a normal mortgage and the loan is repaid when you leave the house to go into care or on death.

    Roll-up Interest

    The interest element of loan is added each month and rolls-up in a cumulative way until the loan is repaid by the executors of your will or other people who are responsible for looking after your affairs should your home need to be sold.

    The maximum amount that can be borrowed under roll up mortgages is a percentage of your home’s value. Other factors such as you age, or the youngest age in joint cases, are also taken into consideration when the provider calculates how much money can be released.

    Monthly Repayments

    The advantage of a roll-up lifetime mortgage is that you do not have to make any monthly repayments. However, if you can afford to make monthly repayments, you might be able to pay-off the interest element of mortgage and prevent the loan from increasing buy using an interest-only mortgage.

    Flexible Lifetime Mortgage Drawdown

    One of the most popular forms of Lifetime Mortgage is one that facilitates drawdown. In this respect, it is very similar to pension drawdown because it allows you to set up a maximum facility at the outset which is agreed by you and the provider.

    You can then take as much cash as you need at the outset and leave a balance (often called a ‘Reserve’) to take at another date in the future.

    Using a drawdown facility means that you can reduce the amount of money on which interest is charged because you will only be liable to interest on the amount of money that you drawdown. You will also benefit from saving on professional fees such as solicitors and valuations whenever you want to release equity in your home.

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