Don’t worry this is not a blog about Engelbert Humperdink!, I just wanted to share some thoughts with you on the subject of equity release, as we have found in recent months that the number of client’s enquiring about equity release plans has increased quite significantly.
Equity release plans are a way for homeowners over the age of 55 to release some money on the basis that the loan is secured against their property and is only repayable upon sale of the property or in the event of death or leaving the property to go into permanent long term care.
The main type of equity release plan available is known as a lifetime mortgage. With a lifetime mortgage, you borrow a proportion of your home’s value. Interest is charged on the amount at a fixed rate which is compounded or ‘rolled up’ over the period of the loan, but nothing usually has to be paid back until you die or sell your home. Lifetime mortgages allow you to retain full ownership of your property and offer a flexible way of releasing money in later life without the worry of meeting regular monthly repayments. Most lifetime mortgages offer a no negative equity guarantee which means that the amount repayable under the plan will never be more than the amount the property is sold for.
Lifetime mortgages are not right for everybody. The fact that a compounded interest rate is applied means that it is likely that by the time the loan is repayable the costs of doing so are three or four times higher than the original loan amount. This will of course mean that the value of your estate could be substantially reduced which might not be your plan! Entering into a lifetime mortgage could also have implications on your eligibility to receive certain welfare benefits and could also affect your tax position.
Whilst it is possible to shop around and compare the different equity release plans available yourself, we would strongly advise you to consult an independent financial advisor to gather information on the various products available and to find the right plan to suit your needs. Make sure that you enquire about all the fees that are involved with any products offered to you as you do not want to be caught off guard!
Once you have found the equity release plan that suits your needs and you are happy to proceed with it, you will be asked to provide the contact details of a solicitor to act on your behalf. We would be happy to help and to provide you with a clear fixed fee quote for guiding you through the legal process culminating in the release of funds to you. For further information feel free to contact our Mr Luke Rees on 01623 663246.