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Did You Know? A homeowner over 55 unlocks £91,667 tax-free cash every 12 minutes in the UK.
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It all depends on the plan provider you choose. Typically, though, the cost of equity release plans are dependent on two factors:
- The initial payment for organizing and putting the plan in action. These include expenses like: financial advice fees, lender’s costs, property appraisal fees, legal fees. These typically range from £900 to about £2000.
- The interest costs charged on the loan amount
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Well, the typical rate for lifetime mortgages is about 5%, even though some are usually under 3%.
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Well, you unlock between 20% and 60% of the value of your home (or for part of it). So, when you die or move into permanent care, the lender takes this percentage plus the interest accrued over the years. For the home reversion plan, you must ensure that you check whether or not you can release equity in several payments or one lump sum.
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Equity release plans have been becoming more popular in the financial market. Although they offer you the financial freedom you need to have a fantastic retirement, they do have some drawbacks. These include:
- They lower the amount of inheritance you leave your family
- You miss out on the increasing estate values
- Your means-tested benefits are affected
- You might have to pay some hefty fees
So, if these plans aren’t your cup of tea, you should consider downsizing, asking for help from friends and family, or re-mortgaging.
Learn More: The Pitfalls of Equity Release
The main drawback of taking an equity release plan is that it doesn’t pay you the full market value for your estate. You get far less cash than what you’d get from selling your home on the open market – although, of course, in such a situation, you’d still have to move to another house.
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