Why should I consider Equity Release?
Picture this, you are close to retirement and struggling for cash (or you simply want to a more comfortable requirement) and own your own home. Equity release is simply a way to unlock the value of your property and receive a large cash sum. For some people, this is an ideal solution and if you are over 55 you don’t need to have fully paid off your mortgage. You can take it all in one lump sum or in several smaller sums, it’s your decision but it’s important to take advice from the outset. This article is general information and does not constitute tailored advice.
It’s wise to consider downsizing first and if you can move to a smaller property and live off the excess cash that is fantastic. You may wish to do this if you have health problems which affect your mobility, perhaps a property with fewer stairs. On the other hand, we do become quite attached to our homes, particularly when they have been in our family for generations. It is easy to underestimate the impact on moving somewhere new and having new neighbours.
So how does Equity Release work?
- Commonly equity release can take form as a mortgage that isn’t paid off until you pass away. The most popular for those over fifty-five is a lifetime mortgage. This is where you borrow some of your home’s value at a set fee. Some versions of this allow you claw back interest.
- Another method is a Home Revision Plan for which you need to be sixty-five. In this case, a provider pays you a lump sum for a portion of your home at below market value. You can then live in your property rent-free until you pass away. After this, the property would be sold and the proceeds would be split between the lender and your estate.
The sooner you borrow the money, the longer the interest has to compound. This is worth considering because taking it early may lead you to pay more interest in the long run. Again, it’s always wise to seek financial advice for a projection of how much interest you will pay.
In summary, it’s worth considering equity release but wise to appreciate the risks involved.
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