Many people approaching retirement age or already in retirement find themselves in a situation where they are in need of extra capital funds. It could be for home improvements, house purchase, supporting family members with their own house deposits, holidays, helping with pension shortfalls or just to make life a little more comfortable.
There are options of releasing some of the equity tied up in your property to help.
Equity Release Schemes exist where you can take a loan that is secured on your home. This is not a decision to be taken lightly, as although it can appear an attractive proposition, there is much to consider. However, more and more senior citizens these days are turning to equity release to ease their worries.
What Equity Release options exist? There are 2 types of Equity release schemes:- lifetime mortgages and Home reversion.
Here we will look at the basics of what each of these entails.
A lifetime mortgage is usually a fixed rate loan that is secured against your home. There is no regular monthly instalment, which means that interest payments are not repayable until your property is sold following a house move, moving into long term care or death. As interest charges are rolled up over the years, all recommended schemes come with a no negative equity guarantee. This means the amount to pay back will never be more than the property value, offering reassurance that your loved ones will not be faced with a surplus debt after your death.
This option is where an Equity Release Company buys a percentage of your property, so you therefore become a co-owner of the property, but you have the right to remain in the property for the rest of your life. You can sell a percentage of, or your entire home, and in return you will get a regular payment. You will be offered at a cost that is below the average market value of your home, usually between 20% and 60% of the market value. Again, you will have a no negative equity guarantee.
Seek Independent Financial Advice from CFP
We have outlined some of the advantages of Equity Release, however this is clearly something that should be explored thoroughly and it is important that you seek both independent financial and legal advice.
Our dedicated team of experienced and impartial advisers are here to help you make the right decision based on your individual situation.
If you would like to make an appointment to discuss this or any financial matter in more detail, please call us on 01608 651608 or fill in our Callback request form and we will be in touch.