I think you’ll agree with me when I say…
If you’ve lived in your home for a long time, down scaling or moving to a smaller new house when you are property-rich is not always a great option, especially with the equity market1 growing daily.
Therefore, if you’re a homeowner aged 55 and above, property-rich with an estate in the UK worth £70,000 and above, you will appreciate the need for proper advice when it comes to equity release proposal. The money released, which you can use to travel for a holiday trip, to pay off an existing loan or debt, save in some circumstances or spent however you like, can be taken as a single lump sum or draw-down term. You may want to pass on money to your family while you are still alive.
With this comprehensive guide, you can benefit by knowing where you can get the equity advice you need and also understand an equity release proposal.
Getting the Right Equity Advice
Before the inception of equity release, most homeowners related to the old cliché of becoming ‘property-rich and money poor’ upon retired. It was mostly because the value of their estates far exceeded their pension savings.
While that may have been not a significant matter when most of them were in the workforce and still had time to add to their pension, it had a more significant impact when they got to retirement, or when they were looking to scale back their operating hours in preparation for retirement.
With equity release, things got simpler. At the point at which homeowners’ understanding and valuation about whether (or not) their pension savings would cover their monetary needs in retirement was the time that they begin looking at the possible methods to complement their pensions.
For most proprietors, downscaling and moving to smaller residences was the ideal option, but for others who did not want to travel and move, an equity acquittance strategy work perfect for them.
Reasons Why Getting the Perfect Equity Release Advice is Vital
With the number of unscrupulous lenders, it’s crucial to get the right information. This guide allows you to have a first-hand look at why you need to seek advice before taking out an release equity plan.
It will assist you in exploring the whole market and weigh up the ideal options for your standings. It will provide you with the necessary information you require, whether you choose to pursue equity release plan, or not.
With that said, here are some of the reasons why equity release plan advice is essential:
#01. It Allows You to Find the Perfect Plan
When taking out a residential mortgage2 , the top deal is usually the one that has the lowest borrowing rate simply because it means that you will be paying lower monthly mortgage repayments fee.
However, when it comes to equity release, that reasoning doesn’t affect you don’t typically make any reimbursement, plus, there are many elements and options available from which you can choose from. There are also plans available that allow you to protect a percentage of your home’s future value so that you can guarantee an inheritance.
So which arrangement or types of equity release (lifetime mortgage or home reversion plan3 ) will be your top bet? Please know the difference between the two. Lifetime mortgage, which is the most common, allows you to get a secured loan against the value tied to your house. It is important to note that the loan is secured against your home. You may roll up the interest fee into the loan amount or choose an option in making flexible repayments to the lender. You will continuing to own your home completely and retain the right to remain living in it for the rest of your life or until you move permanently into long-term care. If you have chosen to pay all or some of the monthly interest, the maximum age at application is 80 years old. Home reversion plan involves selling a part or all of your home in exchange for a lump sum cash or a regular income to bolster your pension and free lifetime tenure. The amount borrowed plus accrued interest charge is usually repaid from the proceeds of the sale of your property when you die or move permanently into long-term care. After your death, the house is then sold and the lender gets back its percentage share.
Well, it is all based on your stage both now and in the future.
We recommend Equity Release Council approved plans which come with a no negative equity guarantee.
If you have heirs, you would probably appreciate having a scheme that guarantees your kin an inheritance. If you want to repay your strategy in full in the future, you will love the early repayment fees tactic that reduces over time. If you have any health issues, then the enhanced plan will enable you to borrow more.
With the number of options available and more plans coming up regularly, it is imperative that you talk through your financial objectives and meet with a registered outstanding professional adviser who should be authorised and regulated by the Financial Conduct Authority (FCA). In turn, he/she can search the whole equity release market and find the perfect deal or products for you and answer questions you may have.
#02. It Enables You to Know the Right Age for You to Take Out A Plan
The standard age to unlock the value of your estate is 55 years and above. However, at that age, the amount of equity you are allowed to release is limited or considerably lower than that older homeowners can borrow. It is because plan providers use a sliding scale, whereby the older you are, the more wealth you can unlock.
Therefore, taking an equity acquittance strategy early in life is managed by your plan provider who will make your borrowing limited accordingly. On that basis, if a release of equity can be postponed, most lenders would always advocate this option or products, as rolling up interest charges from age 55 can amount to paying a significant compounding of interest.
The modern-day lifetime mortgage tactics come with several pliable features to assist you in mitigating the roll-up of interest4 cost if necessary. You will be allowed to work on the interest, voluntary payment elements can now abate the effects of compound interest.
Nevertheless, most borrowers opt not to make any monthly interest reimbursement on their equity release plan, with you repaying the amount unlocked and ‘compounded’ interest when the project ends – when the last proprietor dies or moves into permanent care.
The effect of your decision not to make payments is that the interest
you must repay will grow significantly over time.
Since the age at which you take out an equity acquittance strategy has such a substantial impact on both the amount you unlock and typically the last amount you have to repay, it will be a very personal big decision.
It’s important to involve your close family in any financial decision which will reduce the value of the inheritance left to them or make it limited.
So, make sure you continue to consult your financial adviser who has vast experience and is open to question so that he/she can direct you through this process and tailor a design to your case.
#03. It Allows You to Claim and Keep Your Means-Tested Benefits
If you’re eligible to claim any means-tested benefits – like the Pension Credit or Council Tax Support, taking out an equity acquittance strategy can impact your qualification. Releasing equity might affect your tax position and to your benefits.
Nonetheless, being entitled to state benefits is not always that simple, and your qualification is entirely liable on your standing, and the money advice service equity release plan (lifetime mortgages and home reversion plans) release strategy you select. The first allows you to get a secured loan against the value of your home while the latter allows you to share a part or all of your home in trade-off for a lump sum cash or drawdown and rent-free lifetime tenure.
That said, your financial adviser5 services will help you on two fronts. First and foremost, they will be able to offer you with an indicative benefits analysis to aid you in claiming any entitlement, and secondly, they will ensure that any benefits you receive aren’t affected when you take out an equity discharge.
Whatever the reason, if you’re thinking about releasing equity in your home, you may have questions about how it affects you. It is important to get the facts before making your decision. Consolidating debts over a longer period may mean you pay more overall. The ball lies in your court. It’s up to you to decide what plan will most suit your needs, but it is wise to consider getting the right advice and service from your provider or your financial adviser.
If you need to learn more about equity acquittal plan, be sure to click here and get to know how much equity you can release and chat or call a group or an expert service or specialist service for a plan or products for free.
Plans are regulated by the government’s Financial Conduct Authority, which means advisers and product providers are obliged to adhere to published standards in terms of their knowledge and the way they run their businesses.
Most equity release plans allow you to move house, as long as the home you move to meets your lenders’ considerations. In such a situation, you may be forced to repay some of the mortgages early, thus triggering early repayment charges.
If, however, you haven’t taken equity release yet, then it’s better if you consider taking out a plan that provides you with downsizing protection.
Learn More: Equity Release Advice
Well, equity release is a mortgage plan that allows you to take the cash tied up in your property, and you repay it when you die or move into permanent care. So, when you pass on, the plan provider puts up your home for sale. The lender will then deduct the equity you released, plus the interest accrued. The remaining sale proceeds go to your family.
Learn More: Equity Release Advice
Yes, you can pay back equity release. Some plans allow you to make early repayments like the voluntary repayment option. However, this all depends on the plan provider, the type of scheme you choose, and when it started.
That said, though, most equity release schemes today offer you the option of taking fixed-term early repayment charges. You can make early repayments, thus allowing you to leave an inheritance to your family. It’s also both practical and attainable,
Learn More: Equity Release Advice
The amount of equity you can unlock ranges from about 20% to 50% of your estate’s value. Nonetheless, this depends on:
- The age of the youngest borrower
- Your estate’s market value
- Your medical condition
Typically, the older you are, or if you have any pre-existing conditions like blood pressure, the more equity you can release.
Learn More: Equity Release Advice
Yes, it can. According to the FCA, some lenders do mis-sell equity release plans. If, for instance, you get an equity release plan and you haven’t met the minimum age requirement, 55, then you might have been mis-sold the equity release plan.
There are ways you can know if your lender mis-sold the equity release plan. These include circumstances like:
If you also took out the equity release scheme for over 60% of the value of your estate
If they didn’t offer you fixed interest rates on the mortgage or they didn’t put an upper limit on the variable interest rates
If the plan provider didn’t offer you the option or allow you to remain in your property for life until the plan term ends when you die or move into long-term care
If you wanted to move houses, but you didn’t discuss, or the lender didn’t offer you that option.
If there’s no provision to guarantee your mortgage when there are not enough funds after the sales costs, estate agent fees and conveyance fees
If the lender didn’t offer you advice to make some, if not all interest repayments over your lifetime mortgage plan
If the company didn’t also advise you have the option of releasing smaller amounts of cash, not just the lump sum amount
The list is exhaustive, but these are just some of the chief points that cover a mis-sell. That’s why it’s imperative to understand equity release plans exhaustively before you take out an equity release plan. Make sure that you also seek independent professional help before you get an equity release company to offer you a scheme.
How much money could you release?
An equity release allows you to access the value of your home, tax-free without having to sell up, so that you can have money to spend on whatever you want or need.
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