If you’re property-rich and are strapped for cash, you’ve probably heard of the infamous financial product – equity release schemes.
Well, if you’ve seen this product in the adverts or heard your friend go on about how it’s helped her pay off her mortgage or even establish that life-long business she wanted, then you don’t need to worry.
Equity release is a way of releasing the capital locked in your estate. It allows you to enjoy financial freedom, among other numerous benefits.
However, even with the countless perks, is equity release the best option for you today?
Here’s a comprehensive guide by John Lawson, Equity Release Expert from Sovereign Boss, who will take you to step by step on why equity release is a good idea for you and your family...
Get the Retirement You’ve Always Wished For
Equity release, as the name suggests, involves releasing equity in your home or property. It can be by selling all or part of it under a home reversion plan or getting a mortgage using the lifetime mortgage plan. The products under equity release are quickly gaining popularity with more and more people above the age of 55 using this money to live out their retirement.
Why Is It A Good Idea?
Most people are sentimental about their homes, and this is understandable. It also means that they’re pretty hesitant about doing anything that might make them lose their residences. If you understand the following facts, you will see that this isn’t something you need to worry about because equity release schemes allow you to:
#01. You Get to Retain Your House
Under an equity release plan, you will get about 60% of the value of your home in a lump sum payment, installments or both. However, unlike when you sell your property or default on loan, you don’t lose the house. The lender allows you to retain ownership of your property and live there as long as you maintain and in some cases, insure the home. On your death, or if you move into permanent care, the lender then sells the house to pay off the money given to you and interest accrued.
#02. You Can Safeguard a Section of Your Property
When you take out a loan or plan to sell your house, it’s a bit difficult only to sell a portion of it. It is why most people are scared to use their homes as collateral because then what will their children inherit? If you opt for a home reversion plan or a lifetime mortgage, you can choose to ring-fence a portion of your property. Alternatively, you can choose not to take the entire value of your property. It safeguards your kin’s inheritance.
#03. It’s Regulated and More Secure than Other Mortgages
There was a bit of hullabaloo in the 1980s, and 1990’s some shoddy lenders gave the equity release industry a bad name by arranging expensive plans. It ended up in scenarios where homeowners owned the lenders more money than the value of their home. However, currently, this isn’t something you need to worry about.
Every lender currently answers to the financial conduct authority, which monitors and regulates their activities. Additionally, most lenders that provide equity release plans are also members of the equity release council. The body ensures that:
Lenders comply with the negative equity guarantee. It’ll ensure that you only owe the lender the value of your home. It makes sure that you don’t need to worry about leaving your family in debt;
You get legal and financial advice before applying for either plan;
You get to stay in your home until you die or move into permanent care. It, however, is also subject to you maintaining the house to avoid a drop in property value.
Equity release is a reliable lending option that’s available to anyone over the age of 55, owns their own home and wants tax free money for one reason or the other. Before you make any decision, though make sure you have thought this through and talked to unbiased professionals.