Is Equity Release about to make a comeback? I think it is. Equity Release over the years have seriously fallen out of favour, however it has developed a great deal since regulation was introduced in 2007. The government introduced the regulation of equity release plans, often called Lifetime Mortgages. These plans are designed for people aged 55 and over and are designed to ensure that you can continue to own your property whilst giving you the money and financial freedom to maintain your lifestyle and other financial commitments that you may have.
Equity release is also becoming increasingly important as many people retiring are finding that their pensions are insufficient to meet their income needs in retirement.
As equity release was not widely used over the last 30 years, there have been a number of misconceptions. If you are considering equity release, you may be holding back, so here are a few of the points to consider first.
Myth number 1: You no longer own your own home.
Not true. Many people believe, that taking out a Lifetime Mortgage will affect the ownership of your home. However, your property will remain yours and the mortgage, plus any accrued interest, is only repaid once the property is no longer your primary residence.
Myth number 2: You can end up owing more than the value of your home.
Not true. The ‘No Negative Equity Guarantee’ ensures that your estate will never owe more than the value of your property when it is sold. Once the property is sold after your death, the proceeds of the sale will be used to pay off the mortgage and any interest due that has rolled up over time. After the loan has been repaid, any remaining money will be paid to the beneficiaries based on the terms of your Will. If the property sells for less than the amount of the loan, the remaining mortgage balance will be written off.
Myth number 3: Equity release is not possible if you already have a mortgage.
Again, not true. You can still release equity from your home if you have an outstanding mortgage. So long as you can demonstrate that you can pay off the outstanding mortgage balance with either some of the equity you release or other savings you may have, you can use equity release. Actually, releasing equity to pay off a mortgage has become one of the most popular uses reasons for taking out a Lifetime Mortgage.
Myth number 4: You have to make monthly repayments.
Not true. Despite its name, if you take out a Lifetime Mortgage you do not need to make monthly repayments. Although similar to other types of borrowing, an interest rate is charged. Any interest payable can be added to the total borrowed and paid when your beneficiaries sell the property. However, if you want to pay some of the money back, you can do so. Any repayments of up to 10 percent a year of the amount you have borrowed, will usually be free of any early repayment penalty.
Have you been considering Equity Release? Are you considering all options to increase your income or savings?
Now may be the time to consider your options. Investigating whether Equity Release is right for you and your family may just be what you need to put on your to do list for the coming year ahead.
If you would like to talk to about financial planning, please get in touch for a no-obligation meeting. Go to our website www.miadvice.co.uk and contact us via our “Get in touch” form on our home page or Contact Martin Dodd on 01902 742221.
Email us at firstname.lastname@example.org
It is advisable to take advice from a professional financial adviser when making major financial planning decisions.
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This article has been prepared in good faith and based on Midlands Investment Agency’s understanding of the law and interpretation thereof at the time of creation. The contents should not be regarded as specific advice and we always recommend that specific advice is sort from a qualified professional. No responsibility can be accepted by Martin Dodd or Midlands Investment Agency Ltd., for any loss that may occur by a person acting or refraining from acting on the basis of this article.