With property prices booming in recent years, you may be sitting on a goldmine! You could release equity in your property to pay off those expensive loans, credit cards and other debts to save you money, or you can start on some of those home improvements that you have talked about for years, get that new car, or even take that long overdue dream holiday - WE CAN HELP.
Equity Release is a means of using the value of your property to receive either a single lump sum of cash or regular monthly instalments.
In respect of Lifetime Mortgages this type of scheme is normally attractive to people who have retired and find that they are struggling to meet their everyday bills and look to use the equity in their property to improve their lifestyle. This type of mortgage allows the client to take a lump sum and or income from their property. The principle lenders in this market place offer a negative equity guarantee to ensure that in the event of property prices falling the clients will not loose their home. Some of these schemes allow clients not to make any payments on the money that they borrow and to roll up interest until the property is eventually sold. This type of scheme would involve a family solicitor to ensure that the client fully understands the scheme and the implications in the long term to the equity left in the property which would normally go to the children.
Important factors to consider:
- When choosing an equity release ( lifetime mortgage ) plan, ensure that it has negative equity guarantee. This means that in the event of the value of your property decreasing, the debt will also decrease, in addition, this will ensure that any outstanding debt, after the sale of your property will not be passed on to your next of kin.
- Not all lenders will allow you to move home after you have taken out an equity release plan ( lifetime mortgage ).
- If you are living with a partner, you must take out a joint plan to ensure that the debt will only be reclaimed after the death, or admittance into long term care, of the last surviving partner.
- There can be hidden charges, such as; legal fees (as a solicitor is needed to set up the equity release plan), you will be charged for the surveying of your property. There are also charges for the setting up, maintenance and redemption of the loan.
- You retain full ownership of your home until your death or admittance into long term care.
Is equity release or an equity release mortgage a wise option?
Eequity release mortgages can usually offer a sensible solution for the over 50s who want to supplement their income in retirement, fund home improvements, or simply pay for that much needed holiday away. Equity release has become more prevalent over the past few years, with more and more people taking the equity out of the property, more so now with an unsteady market. Many lenders that offer equity release are members of Safe Home Income Plans.
Safe Home Income Plans
Members of Safe Home Income Plans have pledged to observe the SHIP code of practice, which ensures the safety of all their products. You then have the right to live in your property until you die or are placed into nursing care. These equity release mortgages from SHIP also provide a no negative equity guarantee.
Being protected against negative equity is a huge benefit, if there was a major crash in UK house prices, you would be protected against negative equity, meaning you have one less thing to worry about. So you may be asking, what is an equity release mortgage? well an equity release mortgage can provide you with a regular income by you, the property owner taking out an interest free loan, which will be paid off by the property upon your death and sale of the property commences. The 2 types of equity release mortgage are, a lifetime mortgage and the other, a reversion scheme.
Not everyone has positive equity in their home, for equity release you will need positive equity, with this equity you can use it for any legal purpose, whether it be the purchase of a new car, or a holiday in the sun.
Pros and Cons
- Allows you to free up cash.
- Increased competition means interest rates are falling.
- Enables you to stay in your own home.
- Can cut the inheritance tax bill faced by your estate.
- A big commitment.
- Will reduce the inheritance you leave your family.
- Can impact on State benefits.
