Tag Archives: Advice on Equity Release

Should I tell my children about Equity Release?

One of the reasons for the increasing popularity of equity release mortgages is the rising cost of living and the inadequacy of pensions as the only source of income during retirement. Equity release mortgages are increasingly being considered as an option for financial planning during retirement by homeowners who are sitting on valuable property but need additional cash flow.

As the demand for equity release loans has increased, companies have begun diversifying the type of equity release plans on offer. Equity release mortgages available today are much more flexible compared to their counterparts a few years ago. Interest rates are also generally lower than a few years back. As such, now may be a good time to explore the market and compare equity release options available, for those who are interested in this option, as well as those who already have an equity release mortgage.

As with any financial loan, there is both an upside as well as a downside to equity release mortgages. By taking a loan against the property, the equity in the property is effectively decreased. This has repercussions for the inheritance that you leave behind for your family. There is also the chance of negative equity, where the amount you owe exceeds the value of the home, although most lenders nowadays cancel out any negative equity owed.

Equity release does provide a good way to raise additional money during retirement, whether it is for a one off expense such as a holiday, a car or home refurbishment, or a regular supplementary income. However, an equity release mortgage potentially affects not just the claimant but the entire family. It is therefore important to take the family into your confidence before opting for such a big step.

You can read up information on equity release online, as well as compare equity release mortgages, but the best thing to do if you’re considering releasing the equity on your home is to talk to an independent financial adviser. This will enable you to get objective and impartial advice on equity release, and whether it is suitable for you. Depending on how much additional income you require, whether or not you want to leave an inheritance, and other factors, the adviser can also guide you about which equity release loan works best for you.

Financial issues are a common reason for family feuds. Things like inheritance are a sensitive matter and before taking any final step relating to your property, it is advisable to understand the consequences thoroughly. There may be other alternatives to raise money, and downsizing is always an option. Equity release mortgages may not be the right choice for some, and may be the perfect choice for others. But once it is opted for, it is difficult to opt out of equity release loans, so take your time to understand exactly what it entails.

Do I need insurance if I apply for an Equity Release Plan?

As property prices have risen dramatically over the past two decades, thousands of homeowners find themselves in a position where they own valuable property but require additional cash flow to support them during retirement. This has led to equity release plans becoming increasingly popular in recent times. These loans allow homeowners to continue living in their property whilst freeing up some of the value of the house in the form of a cash lump sum, or monthly payments.

There are mainly two types of equity release schemes, lifetime mortgages and home reversion mortgage. A home reversion plan is where you sell a proportion of the property in terms of value, and this loan is repaid after the house is sold. A lifetime mortgage means that you mortgage the home against the loan, and make interest payments over your lifetime. In both the loans, the balance is recovered after the house is sold. This is usually after the owner has died or moved into long term care.

As the equity release market has matured, mortgages have become more flexible in their terms. Today there is a wide variety of loans available in terms of how you repay, period of repayment etc. There are equity release comparison sites that can help you get an idea of the different types of loans on offer.

Equity release plans essentially offer loans against the property as collateral. As such, most equity release lenders require the applicant to have a valid home insurance policy on the property. This is meant to protect the property from damage due to different causes, such as fire or flooding. Home insurance in this case means buildings insurance and not just home contents insurance.

An independent financial adviser can give you objective and sound advice on equity release in general and give you information about the different equity release plans available. Too much choice can be confusing and an adviser can help you choose the right loan for you. An adviser can also provide accurate guidance on the procedure of applying for an equity release mortgage and the type of insurance you are required to get etc.

Equity release loans do not suit everyone, but could be the perfect option for many. Whether you’re looking to raise extra cash for a specific goal, or boost your regular monthly income, freeing up some of the equity in your property without selling your home could be just the option you’re looking for.