The Facts About Equity Release
Few of us are lucky enough to have a final salary pension and annuity rates have diminished. Meanwhile we’re living longer and able to stay active into later life. So we need a good income for more years. You may also have seen your children struggling to get on the housing ladder and want to help. Equity release allows you to use some of the wealth tied up in your home to pay for house repairs, a mortgage deposit for your children, holidays or a better quality of later life.
This factsheet will help you understand more about equity release and how these products work. But always remember that you have choices. The Financial Detectives team will help you choose the best product or products based on what’s most important to you.
How Does Equity Release Work?
There are two basic types of product and hybrid schemes with elements of both. You must be over 55 to apply.
Lifetime mortgages are interest only loans secured against your home. Any unpaid compounded interest plus the sum advanced are recovered from your estate after you die.
Property reversion schemes are where you are paid a sum of money in return for a share of your property. The amount paid will be less than the market value. The lender gets the same percentage share of your property value (including any appreciation) when you die.
The right professional advice will help you choose the most appropriate product and to help you understand the impact it will have on your estate.
The market is now fully regulated by the Financial Conduct Authority. The FCA also insists on additional training and certification specifically to sell equity release products. The horror stories of the past, where people inherited a significant debt as well as losing their parents’ property can no longer happen. All policies now have a ‘no negative equity’ guarantee.
If We Are Married Does it Have to be in Joint Names?
Equity release doesn’t have to be in joint names but you must make sure that your decisions are consistent with your wills and the intentions for your estate. We can advise you on this.
Instead of, or alongside equity release, you could get a Retirement Interest Only mortgage (or RIO). Even if you are over 55 or retired you could get a normal repayment mortgage. You also have more freedom than ever over how to manage your pension funds. Or you can downsize.
Equity release is worth considering but isn’t your only option. Take some time and get professional advice before you do anything. But, above all, don’t struggle on thinking you have no choice.
The Financial Detectives are a family-run firm of financial advisers based in Taunton. We have been in business for over 20 years and have earned an excellent reputation in the area. Most of our business comes from repeat customers and referrals and we have consistent 5 Star reviews on Google. Contact us on 01823 218147.
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