Is an equity release the right solution for me?
If you are thinking about obtaining an equity release, you should ask yourself a few questions. Are you keen to benefit from the value that is currently locked up in your property? If you answer yes, ask yourself whether you have considered the alternatives to obtaining an equity release. Some of these alternatives include:
- Downsizing your property and using the surplus funds
- Utilising savings, investments or other assets you may have
- Seeking help from family help, obtaining grants or calling on state benefits which you haven’t claimed
- Undertake no action
If these alternative options don’t sound too appealing, you will find that an equity release is far more palatable.
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Can I lose my home?
If you take out a lifetime mortgage, you will always be the owner of your property, so no.
Will I leave a debt for my loved ones to take care of?
No, and this is one of the strongest elements of an equity release. The worst case scenario is that there is no property value left but any debt will be written off by your lender. It is also possible to guarantee a specified percentage of your property is left behind.
Will there be anything of value left?
This depends on a few variables including the amount of money you borrow, when the amount is borrowed and how long you actually live for. The value of your property, and how this changes over time, will also have an impact on the value.
Is it possible to repay at any point?
Yes. If you receive additional money or find yourself in a position to repay the full amount, you can do so but there is a possibility that there may be an early repayment involved.
Is the interest rate higher when compared to short term rates of interest?
Given that the release is based on a lifetime mortgage, the lenders need to take a longer view on the interest rate and make projections about the right rate. This leads many lenders to erring on the side of caution, and this means that the rate is higher than what is seen in many short term interest rates. It should also be remembered that the current rate of interest for short term loans is low, but in the past they have been considerably higher, so it may be that over the lifetime of your agreement, the interest rate, which is fixed, will become more attractive than a short term option.
Is this form of release safe?
It is fair to say that the equity release market is safer than it has been at any point and the Financial Conduct Authority, the FCA, provides a level of confidence to all participants. Anyone advising on equity releases must be specialists with qualifications in this field.
There is further protection provided by the industry body, The Equity Release Council, who came into being in May of 2012. The Council is committed to protecting plan holders and promoting the reliable plans. The industry as a whole has welcomed the Code of Practice and some of the most prominent guarantees on offer include:
- The ability to stay in your home for a lengthy period of time
- The freedom to change homes without suffering any financial penalty
- The right to avoid negative equity, regardless of what happens in the property market
- The ability to obtain independent legal advice from a solicitor you choose
Choosing the right provider will also provide you with an added sense of confidence and expertise, ensuring you receive the highest level of support and advice at all times. Working with an independent expert will guarantee that you understand all of the positives and negatives that can arise from an equity release plan.
You should also ask yourself have you obtained enough information to make the most informed decision that will positively impact on your family. If you answer yes to this question, you should be confident that an equity release plan is perfect for your needs.
However, it isn’t an option that is right for everyone, which is why you should speak to an independent advisor who will examine your situation and provide you with the best solution for your needs. If an equity release plan isn’t right for you, we will provide you with an honest appraisal.
Our advisers are pleased to offer a consultation with no obligation and no initial cost. This will provide you with the perfect platform for determining what option is best for your needs.