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Is Equity Release a Good Idea? Is It Secure?

I think you’ll agree with me when I say…

Currently owning a home with the dramatic rise in UK property prices over recent years makes you one of the luckiest retirees on earth.

Why?

Well, with the invention of equity release, you now have the option of unlocking the cash tied up in your home, without you having to sell or downsize to a smaller, low-cost property. 

In fact, thousands of people are opting to raise money for retirement through these schemes – and in the UK today, retirees are taking out an release every 12 minutes.

What are you waiting for?

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Get the Retirement You Deserve

With the upgrades in medical technology and increasing numbers in fitness centres, the life expectancy rate in the UK has risen from 50 years (in 2000) to 78 years (currently). Meaning most people are living past their retirement.

That said, retirement is an exciting prospect, but it is also one of the most potentially challenging phases in human life when it comes to money – especially if your pension does not cover all you need it to and you have no idea how to make up the shortfall.

Through releasing equity, you can get a tax-free lump sum or smaller cash injections to top up your pension. This way, you can maintain your lifestyle, and since there are no limitations to how you spend the cash you release, you can go on that vacation, start up a small business and even help out your family. You can get more information on this by checking out ‘What is Equity Release?’

However, in as much as it can be your knight in shining armour, it has some limitations & pitfalls.

Thus begging the question, is it a good idea for you?

Attractive Benefits of Equity Release

Equity release schemes are rapidly becoming the most-sorted way to release the equity from the value of your home. You can enjoy the perks of having built such equity, while still maintaining ownership of your estate. The beauty of it all is that there two incredible ways to do this.

You can choose to either take out a lifetime mortgage which involves taking a secured loan on your property or a home reversion scheme which comprises selling a portion of your property.

These schemes give you the financial freedom to take money from the equity of your home and spend it as you wish

A home reversion scheme even goes as far as offering you a guarantee of leaving a percentage of your property to your beneficiaries.

That’s not all.

There are more benefits to taking out equity release, thus making it an ideal choice for anyone above 55+, strapped for cash and owns a home. They include:

1. You Get to Stay in Your Home

It is one of the top benefits of taking out an release plan. According to the American Psychological Association (APA), selling your family home and moving to an unfamiliar place can be emotionally as well as physically draining.

No one wants to be separated from their long-term friends and other family members staying close to them. You might even need that extra room to have cocktails and barbeque Sundays with family and friends. Moreover, when the grandchildren come over for the summer vacations, they will need that spare bedroom you have currently, so downsizing might not be the ideal solution.

There are also costs involved in moving: solicitors’ fees, removal costs, stamp duty and the emotional price of uprooting from a place you have spent the majority of your life bringing up your children and making memories with your friends and neighbours.

By taking out an equity release, you will be able to maintain your independence and the right to remain in your family home.

2. You Get to Live a Life of Luxury

Equity release, unlike other financial products that demand you to write a business plan, allows you to enjoy your cash as you wish.

It aids you in fulfilling your dreams. Whether you need to on vacations to foreign and exotic locations, purchase the recent Mercedes X, or even carry out the much-needed home improvements like redecoration. Having a lifetime mortgage or home reversion plan gives you this financial freedom and more.

To others, equity release is a way of gifting to the children now, rather than later and happily seeing them enjoy bringing up their grandkids without the financial constraints that the modern society is currently imposing.

For many, they feel that they have worked hard for their money and want to spend it themselves. Some people don’t want to leave an inheritance or don’t want it all to go to a charity, so they’d rather have the money now and spend it as they wish.

3. Guaranteed Returns

Equity release provide you with the benefit of having guarantees throughout your life. It can be the guaranteed rates for life on the lifetime mortgage scheme or the no negative equity guarantee that ensures that any equity release scheme is adhering to Safe Home Income Plan (SHIP) regulations.

The no negative equity guarantee ensures that your heirs cannot ever incur any debt over & above the property market value once you have died or moved into long term care.

These are some but a few of the benefits you are bound to attract by taking out an release, thus making it one of the best decisions you will ever make!

Is it Safe?

As a result of corrupt practices in the 1980s and early 1990s when a couple of unscrupulous lenders planned expensive deals that ended up having homeowners owe more than the value of their estates, equity release scheme rightly got a bad name, thus leading to uncertainty in consumers.

Nevertheless, there no need to worry

With the new regulated Financial Conduct Authority, things have improved drastically, thus making equity release safe and progressively becoming a valuable tool for making retirement more comfortable.

Now, release plans are regulated by the Financial Conduct Authority (FCA), and most plan providers are signed up to the Equity Release Council, a trade body that sets the standards for release.

To ensure that you get the right plan, the council stipulates that:

  • All rates must be fixed, or if not, the plan provider must have an upper limited or cap that is secure for the lifetime of the loan
  • You have the right to live in your property for life or until you move into long-term care, just so long as you abide by the terms and conditions of your equity release scheme.
  • You can choose to or not move to another estate as long as your lender is satisfied that the new property offers continued security on your equity loan.
  • Any lifetime mortgage plan must come with the ‘No negative equity’ guarantee which means that when your home is sold, and solicitors and agents fees have been taken into account if the amount left is not adequate to pay the unsettled loan, neither you nor your estate will be liable to pay any more.

Moreover, for your security, the Council also offers strict rules and guidance on the sales process and demands that you can only take out an equity release loan if you get proper financial guidance and independent legal advice.

Taking out equity on your family home can be a nerve-wracking decision to make. However, with the stipulated rules and monitored transactions, you need not worry. Equity release can be one of the smartest decisions you will ever make, and with all the benefits you are bound to gain, your retirement can be your golden age, literally.

So, what are you waiting for, give your financial adviser a call today and make your retirement as comfortable as it can ever be!

If you need more information on equity release and other plans, be sure to click here and see how much equity you can release and also get to chat with an expert for free.

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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