Do You Have Any Query about Equity Release Scheme?

Most of you would have dreamt of a lavish retirement but when you get into the real world of retirement, the truth might be frightening. When your financial life seems to be shattering, equity release can prove as a Good Samaritan by providing you enough capital to fund a dream retirement.

However, there are some frequently asked questions about releasing equity from house by the prospective as well as existing consumers. Take a look at a few questions that might be running into your mind.

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Question: How safe is equity release?

Answer: This scheme is safe and secured, if you have gathered all the required information about it. There are several rules and regulations enforced by the Financial Services Authority that safeguard the interests of consumers. The most striking thing about equity release is that there will be no negative equity on your house under any circumstances.

Q: How will I know if this scheme is right for me? 

A: The Equity Release Council has made it mandatory to seek advices from financial experts, who have in-depth knowledge of the equity release market. They listen to each and every need of yours and provide a solution accordingly. If anytime during the interaction, they find that this scheme is not good for you, financial advisers will provide you the honest suggestions.

Q: How is the loan repaid and what about inheritance?

A: If you go for life time mortgage plan, your representative has all the right to arrange for selling off the property and repay the loan amount with the rolled up interest rates. Any left amount is retained by your representative or family members. Under the home reversion plan, as you have sold complete or part of your property to the reversion provider, they will arrange for the sale.

Q: Can loan amount be repaid early? 

A: Yes, you can repay the loan amount early; however, you may have to pay some early repayment charges. The amount to be charged varies according to the scheme provider, some may charge for first 5 or 10 years whereas others charge you for the entire term of the plan.

If you have chosen a fixed rate to pay under the interest only mortgage and want to repay the loan early, you may be charged a redemption penalty.

Repaying the loan under home reversion plan is intricate, as you will have to buy back the sold proportion of your house at market value. This might be very expensive and you must not see it as a short term commitment.

Similar to these there are several other queries in the mind of customers. If any query still persists into your mind, feel free to seek a solution from the financial advisers.

Equity Release Scheme has a Bright Future, Financial Advisers Feel

Analysis from a leading mortgage service provider says that 96 percent financial advisers believe that equity release can help retired citizens, who are lagging behind on pension or dealing with mortgages. This plan can also be helpful in paying off other debts in retirement.

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This survey on equity release market highlights that more advisers are interested in catering their services to a large number of clients. They also acknowledge it as a part of their business and can only grow with their hard works.

Some professional believe equity release as a worthy solution to boost living standard in retirement. Besides paying off debts, equity release can also help in funding long term care cost.

However, most financial advisers believe that there is a need of improvement and awareness of equity release products and its potential benefits amongst the consumers.

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Out of all the financial advisers surveyed, only 33 percent were qualified or offering services of qualified individual in their firm and only 10 percent participated energetically in the lending services in equity release market.

Financial advisers were asked about the reasons preventing equity release advice to top the marketing priority and they reasoned interest rates behind it. Equity release interest rates are high and that is the reason why most people prefer not to take equity release. A large number of people are also mulling over other market opportunities that are available at lower interest and are cheap.

While advisers are well versed with products in equity release market but less than half are qualified to lend services themselves or from someone else who is qualified in their firm to advise clients.

Although, they can refer the clients to someone, who is expert on this matter and qualified, but most of them like dealing clients in house.

Some financial institutions work with top equity release providers and expert advisers in equity release market to provide beneficial services to clients.

The research mentions that 50 percent of unqualified advisers are willing to obtain necessary qualifications to provide expert opinions to clients.

The financial advisers prove to be handy in clinching a beneficial equity release deal. They help you evaluate property with equity release calculator and let you know the equity amount you will be able to withdraw from your house.

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Equity release has taken out millions of pensioner household from poverty and continues to doing so. With a rising number of retirees in UK, it is expected that importance of equity release scheme will continue to be felt for a long time.

Keen on Taking Equity Release Scheme: Know All About It before Grabbing the Deal

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Before you push into equity release deal, it’s wise to know everything about various types of schemes being provided in the equity release market. You should know, based on your circumstances, that which one will offer you more benefits. Each equity release scheme is attached with certain kinds of benefits for respective age group and committed to offer benefits based on your needs and wants. 

Usually, equity release facilitates ownership retaining rights on all the schemes. It means that in spite of mortgaging your property, you can live rent-free in the house for entire lifetime. Equity is withdrawn on the current value of your property and no negative equity is guaranteed under all the circumstances. 

Money can be withdrawn in large cash lump sum or as monthly income. Typically, equity release money is tax free but when you use the money to generate income, it can be taxed. You have freedom to use the money as per your wants; equity release does not put a bar on it. 

So, now that you have known entire virtues of equity release, take a look at different schemes and what they have to offer you. Typically, equity release comprises of two basic schemes.

Lifetime Mortgage: Holding similarity with standard mortgages, lifetime mortgage is secured against the value of your property. But, it functions quite dissimilar to standard mortgage plans. You do not require making monthly repayments, as interest built-on and added into principal amount later. Usually, loan amount, in addition to interest rates, is paid by selling off your property, which you can occupy until death. 

This plan is beneficial for them, who are unable to carry out monthly interest rate payments. Although, a typical lifetime mortgage allows you to withdraw equity in large cash lump sum but, these days, this plan has been made more flexible. Drawdown lifetime mortgage facilitates to withdraw money as monthly income as well. On the other hand, if you are keen on paying monthly interest rates, interest only lifetime mortgage can be a solution. 

Home Reversion Plan: If you are keen on leaving inheritance and at the same time want to withdraw more money from your property, home reversion can be a better idea. Under this scheme, if you are over 65 years of age, you can sell entire or part of your property to the money lender. 

This plan has some unconventional offers as well. If your property gains in its value, in the future, you will be provided additional amount at the end of plan. 

However, choosing best equity release schemes can be complex and you also required to know all the risk factors involved into releasing equity from your house. It is always recommended to seek advices and opinions from financial experts.

Take equity release as last available option

If you are fifty years of age or above and under financial cloud, equity release allows you to encash your property to lead a comfortable monetary life. Money received from the scheme help you to carry out home improvement plans, wedding of a family member, buying a new car, holidays plans, or simply enthuse the much needed cash flow in your post retirement life.

Unlike downsizing and selling off, under this scheme you are allowed to live in your home for lifetime and also gain income from the property that have been built up over the years. 

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Proper diligence before asking for equity release scheme

However, while making a choice with the scheme, one needs to be cautious and mull over every aspect that it might make an impact. Equity release market has been in criticism in the past years in lieu of being expensive and inappropriate for many homeowners.

Basically, equity release scheme is divided into two parts: Lifetime mortgages and home reversion plans. The qualifying age to avail any of these schemes is fifty years but it is said that the older you are, better is the chance to benefit more. 

Lifetime mortgages are also called as roll-up mortgage that is a home loan taken against your property. The limit on percentage value varies with age and interest rate is applicable to the amount that is borrowed. Usually the interest is rolled up if you die, decide to sell the property or go into the care house.

People, above the sixty five years of age can go for Home Reversion scheme. According to this scheme, you are required to either sell the entire property or part of it to the equity release company at lower than market value. You do not have to pay the interest rate and remain living in the house till the time you die or decide to move to long term care. 

State benefits are curtailed

When you avail such schemes, state benefit entitlement are reduced, including medical care. Higher interest rate is charged if you compare it with other standard home loans. So, if you have other options, equity release might not be all beneficial for you. You can use your cash savings, down size the property, or may ask for financial support from family members. 

Equity release reduces the worth of property and family members get lesser inheritance. So, under such circumstances, you can talk to your family members, who are the ultimate beneficiaries of your property. Let them know about your decisions to avoid misunderstanding in the future.

Seeking advice from financial experts might prove to be of great help as you can compare equity release schemes with other existing plans and pick the best suitable option available in the market.

Have A Wonderful Post Retirement Life With Equity Release Schemes by Ethan Carter