Equity release is exactly what it means — releasing part of the equity (value) trapped in your home. If you plan to call your home a permanent place until you pass away, then equity release schemes are exactly what you’ve been looking for. However, this isn’t to say that you should just blindly go into any equity release scheme without looking at what’s really involved. That’s going to get you into hot water, and who really has time for that?
You need to realize that an equity release scheme is a lifetime mortgage. There are some strong benefits, but there are also some dangers that you really need to be aware of. This guide strives to cover all of that for you.
First and foremost, you need to realize that you will not release ALL of the equity in the home. The scheme company will not let you have 100%, as you must make up for fluctuations in value over time. You get a lump of cash that you can use to handle just about anything you wish. Nobody can tell you how to spend the money, but there are costs involved with an equity release scheme. These costs and the amount you take out will reduce your overall inheritance that you can leave to your children and even your grandchildren. If you don’t have heirs of this type, then it really won’t make much of a difference. On the other hand, if you do have heirs, you will need to make sure that you’re thinking carefully of everything involved.
You must ensure that you have thought about these fees and discussed them with your spouse. Both signatures are required for an equity release if you have both people on the mortgage and the deed to the property. If it’s just you, then only your signature is required.
If you have welfare benefits coming to you, you will need to speak to an independent financial adviser to ensure that you’re aware of any losses that may come about as a result of taking advantage of this scheme.
Some scheme companies let you sign up for what they call an “inheritance guarantee” so that you leave something to your heirs, but this will dramatically reduce the amount of cash that you get out of the scheme in the first place.
In order to even qualify for a lifetime mortgage, you’ll need to be 55 or older. In order for your house to be qualified for the release scheme, you need to have a house of “standard construction” within the UK. If you’re worried that your home will not qualify, you need to ask about this before you commit to anything. The amount that you are eligible to have pulled out of the property will ultimately depend on its value and the condition it is in when appraised.
You still get to own and live in your own home — nobody is going to force you out if you sign up for one of these schemes. The only time that you will need to worry about your home is when you have to go into long term care. That is when the release company will handle your home. This will all be spelled out in the agreement you sign in exchange for the cash lump sum.
The biggest fees that you’ll need to think on are the arrangement fees and the amount that you’ll need for a solicitor to handle your affairs. You’ll also need to pay for someone to come out and appraise the home to figure out the value.
Before you get invested into a lifetime mortgage, look up the interest rate. The APR will be higher because you don’t make any payments during the mortgage’s term, but don’t let that keep you from actually getting the money you’re looking for.
There is usually an early repayment term for the money, so be aware of that — this is designed to last you for the rest of your life!
Overall, there’s a lot to think about with an equity release scheme of any kind. Talking with an IFA before you make any changes can be a wise move to make. They will let you know whether or not this could be a good fit for you based on the specific information that you give. Check it out today for yourself, you’ll truly be glad that you did!