Unlocking the Mysteries of Equity Release
“The question of whether or not to release equity in their homes is one that many retired people are considering more and more as each month passes, it seems.
Some need to raise funds for their children or grandchildren to get on the housing ladder, some are looking for ways to reduce a potential IHT liability, some want to improve the home, but for some, it`s just a question of an easier lifestyle in retirement. Whatever the reason, more people than ever are taking out a lifetime mortgage – releasing value held up in their homes as cash for all sorts of uses and reasons.
The schemes work by effectively turning equity into cash. As with an ordinary mortgage, the lender puts money into the hands of the borrower. No monthly payments are required and interest is then charged and rolled up onto the loan, usually at a rate fixed for life. When the borrower dies, the lender recovers the money owing from the estate of the deceased.
During their lifetime, most schemes allow the borrower to make payments as they go too, if they wish, to either reduce the amount owing or to “cap” the loan and therefore reduce the amount of interest that is added each year to the existing debt. By making payments of the interest accrued as they go- or ad-hoc, it enables more of their equity to be left for either future spending as a drawdown facility, which is also available from many lenders now or for increasing the amount left to their family as beneficiaries.
Some of our clients have recently handed their children a sizeable deposit, to help them jump onto the property ladder and move them out of more expensive rented accommodation, some have done so to pay off their interest only mortgage, which is coming to an end, with no other way of repaying it in sight. Some have found the interest rate they can fix into now, is so much better than their existing fixed rate on their current equity release mortgage.
Whatever the reason, it seems equity release has become a more popular and mainstream way of raising some welcome monies than perhaps in previous years. With no negative equity guarantees now, that ensures you can`t owe the lender more than what your property is worth, tighter FCA regulations, better products and generally lower rates than have been available in the past, the equity release market is definitely coming of age.”
Tony Adams – Principal, Touchstone Sussex
Equity Release will reduce the value of your estate and can affect your eligibility for means tested benefits.
IHT Planning is not regulated by the FCA
Touchstone Sussex are experienced financial advisers who can offer you a free initial meeting and without any obligation, with a choice from a wide selection of equity release providers in the market.
Please contact us for an initial discussion now, we will be happy to help.
Tel: 0330 353 0025 Email: firstname.lastname@example.org