Considering Equity Release?
If you are considering equity release, it is essential to research the companies that offer this service. There are many different types of equity release schemes, and some work better than others, depending on your situation.
There’s no need for concern if you’re looking at what kind of options might be available in the future or have already started planning for retirement; however, there can be severe consequences resulting from bad decisions without careful review of all possibilities.
If you find yourself with few assets but not lacking an income stream, then fixed annuities may suit your needs best. These products will give regular payments over time while providing a lump sum at the end to help fund your retirement.
What Should You Know About the Types of Equity Release?
The types of equity release help you understand the various options available to you. For example, fixed annuities provide regular payments over time, with a lump sum at the end if desired.
These work well for people with little income but too much in assets, such as a pension.
However, these products are often not appropriate for older retirees who may need regular payments now and do not have many years left to live. In this case, some form of equity release will be required to keep living on their terms without moving into assisted care or selling the family home.
A lifetime mortgage is a type of equity release. It works by borrowing against your home or other assets and repaying the loan through regular payments from your pension, savings, investments, or social security benefits.
The size of these loans can be up to 100% of the value of all property owned freehold and for leasehold land and buildings at age 55 if necessary. This will typically cover any outstanding mortgages on properties held as tenants in common (TICs).
However, this may not always be enough to fund retirement needs, so you might need additional support like an annuity with lifetime income guarantees that provide income until death while increasing its monthly payment more than fixed annuities do over time. Hence, it meets future obligations such as high-cost medical expenses or long-term care.
If you get a loan, contact a qualified Chartered Financial Planner first for guidance on the best repayment plan based on your current circumstances and future needs.
They will also assist with investments to generate sufficient income that is guaranteed not just for five years like most equity release plans offer but until death, so it’s secure enough for you and your family when all other traditional sources of retirement funding have dried up.
A home reversion loan is an equity release plan which makes it possible to convert the value of your house into a monthly income.
It can be used as a pension fund when you retire and live in your property until death, or for those who are no longer able to maintain their mortgage repayments because they have become too old or sick but still want to stay in their family home.
Suppose you’ve paid off most of the cost of your housing. In that case, this type of scheme may not be suitable as it will only cover part of that amount, so speak with a professional advisor before making any decisions about whether this could work for you based on what stage you’re at financially and where the property market might be when you come to sell.
However, some equity release companies will allow people with an interest-free mortgage deal on their property or a leasehold that has no set end date for occupancy to use this type of scheme and still retain the right to live in it at any point until they die.
Best of all:
Home reversion loans typically charge a monthly fee that is based on the value of the house (typically between 75-150% depending on how much equity remains) as well as what stage is covered by the plan, so speak with your professional advisor about different options before making any decisions about whether this could work for you financially based on these factors too.
The Benefits & Drawbacks
The benefits of equity release schemes are that they can provide a regular income for the individual and give them access to funds.
There is no need to worry about future financial issues as these plans will be there for you in your retirement years when things may get more challenging financially.
The other benefit is that people who take out this type of loan don’t have to sell their home to enjoy living somewhere else during later life or use it as an inheritance for family members.
On the other hand,
While many homeowners think they won’t ever want or need extra money after selling their property – remember even wealthy individuals might come into unforeseen circumstances such as illness or disability, which could change everything – so I would urge everyone with interest in this type of loan to investigate a bit further.
The drawback to Equity Release is that the investment can be costly, and it’s not an option for everyone.
Another disadvantage of this type of loan is that a homeowner has to pay back what they borrow over time, so even though you won’t have equity in your home anymore – if there isn’t enough money coming into the household, then someone will have to continue paying because otherwise, any property sold could result in a loss which would mean more borrowing.
A lender or company should always provide information about costs upfront, so people know how much they’ll need on top of their regular retirement income to repay the debt with interest and keep up with day-to-day living expenses like food, fuel, and utilities.
Is Equity Release Safe?
Safety is paramount when considering a loan, and with equity release, there are some potential risks.
The two main areas of concern for people who take out this type of loan are the risk that they’ll have to sell their home or move into residential care at an older age than they might otherwise do because the value has fallen; and charges which may be incurred if someone takes out more money from their property in one go than was initially borrowed, which can result in them paying interest on what’s owed as well as fees charged by lenders.
Therefore, it’s important to make sure you’ve talked through these potential problems – either before taking up an offer or during your discussions with a lender – so it all becomes clear ahead of time and not later down the line.
What are the Interest Rates?
The interest rates for equity release loans are usually higher than those on a standard mortgage. However, you can find out the current rate from your lender if you ask them and compare it to other deals available from different lenders so that you’re not paying more than necessary.
There’s no set list of providers who offer these types of loans as they come in all shapes and sizes – but there are some things to consider before making any commitment.
It’s good to know,
Equity release schemes don’t always provide an immediate solution; with borrowings often payable over 15-20 years, this type of investment may be better suited to someone looking at pension options rather than young people buying their first property or downsizing soon after getting married.
It should also go without saying that you always need to shop around for the best deal – there’s no point paying more than you have to.
If repayments are set out in advance, then it may be possible to take a lump sum on top of this and use that money as an inheritance or supplementing your pension pot – but again, not all schemes allow this, so talk with your provider before rushing into anything too quickly.
As well as these considerations, it’s important to note what will happen if you die: will the loan pass onto your estate? How much does equity release cost?
The Best Equity Release Companies
It would help if you always did your research before taking out a loan for Equity Release Companies, as many companies offer these services. Some will be more reputable than others, and the best way to find this is by reading previous reviews from customers.
It’s important to remember that to access equity release schemes; you’ll have already paid off or sold another property with cash – so it’s not just about borrowing money but also making sure you can afford the repayments without going into debt elsewhere.
You may want to consider what will happen if you die during repayment: some of these loans require an interest rate every year until they’re repaid, which could mean hefty fees on top of funeral expenses! Make sure you read up on how much equity release costs, what you’ll need to qualify for it, and the risks before using an equity release company.
Many different companies are offering these services. Some will be more reputable than others, and the best way to find this is by reading previous reviews from customers.
The bottom line?
It’s important to remember that to access equity release schemes; you’ll have already paid off or sold another property with cash – so it’s just about borrowing money but also making sure you can afford the repayments without going into debt elsewhere.
In addition, you may want to consider what will happen if you die during repayment: some of these loans require an interest rate every year until they’re repaid, which could mean hefty fees on top of funeral expenses!
Top 5 Best Equity Release Companies
Here are the top five equity release providers based on their reviews and testimonials. Of course, there will be others out there, but we’re confident these can offer excellent personalized customer service and provide the principles of equity release to all those who need it most.
AVIVA offers equity release loans from £50,000 to a maximum of 25%, including the value of any property you own.
The interest rate is low at just over 0.75%. The loan must be repaid within 15 years, and there are no fees for making additional repayments during this period.
AVIVA doesn’t charge inheritance tax on your estate if they hold onto your home until it’s sold or when their mortgage has been paid in full (except where local law says otherwise).
Here’s the deal:
After that, you can take out up to 50%. Still, below that amount, only the equity would qualify as an asset that might impact things like how much state pension you’re entitled to and other benefits you may receive in retirement, such as free travel passes for your pensioner bus pass.
There’s a maximum interest rate that is set by the FCA (currently 0.75%). There are no fees for making additional repayments during this period, and part payments can be made at any time if you need more cash in hand.
HODGE Lifetime covers all loans into one with an equity release plan, so there’ll only ever be one repayment that needs to be met each month rather than many different ones. It doesn’t matter how long they last because when repaid over 15 years, Hodge will also pay off both your mortgage and free up the equity in your home.
All you need to do is contact Hodge Lifetime, and they’ll be able to provide more information, all of which will be available online too!
We have recently introduced a new Lifetime Freedom Plan perfect for those looking to release their equity in five years or less.
This plan offers an interest-only period of up to five years with no monthly repayments so long as you only take out the amount you need and then return it within this time frame.
Of course, after this point, they’ll start charging mortgage rates on whatever’s leftover, plus there are also fees if you want any more money during these first six months, but after that, everything changes!
Just retirement will charge your mortgage rate on all future lifetime withdrawals without any other charges like administration fees; just think about how much money we’re talking about when they offer such low prices!
LV (Liverpool Victoria)
This is a company that offers an Equity Release Plan on the purchase of your property. This plan is perfect for those with limited income and no other assets to help them pay off their mortgage debt in the future or just want some extra cash now!
Many people love this particular equity release because it’s flexible, and you can choose how much money you need every month. Whether it be £500 or £5000, they’ll allow you to take out any amount over ten years without charging admin fees.
Some companies offer ‘drawdown plans’ like LV, which means that instead of taking everything at once, they will only release funds when requested by the client, so there won’t be any interest charges during these periods.
Legal & General
Legal & General offers a product called the ‘fee-free equity release plan,’ which means that you are never charged any fees whatsoever with this particular option.
This is because they have teamed up with mortgages, solicitors, and financial advisors to offer their clients a service to help them decide on an appropriate product package for their needs without it costing anything at all!
The company will first analyze your circumstances in detail before recommending what would work best for you personally – whether it be releasing some funds as quickly or as slowly as possible.
What Should I Look Out For In Equity Release Companies?
It is important to look out for this company’s financial standing. We would always recommend looking into their shares to see how well they are doing financially and whether or not it is a wise investment for yourself.
How Do I Know If An Equity Release Company Is Good?
How Do I Know If An Equity Release Company Is Good?
Find out how long the company has been operating and what type of investment it offers.
- Look at its credit rating, whether or not they are on any watchlists, their financial standings in FTSE 100 listings, etc.
- Research into who is backing them financially if anything were to happen would provide redress for you; will this be a lender? Will there be others involved too? Are they trustworthy? How much might this cost me? Is it something I can afford to do now as well as when my needs change (i.e., in retirement)?
- Ask about their level of service – Do they offer flexible payment timescales, a fixed repayment period with no early exit penalty charge, and o repay the loan.
Are There Any Equity Release Companies I Should Avoid?
Avoid equity-release companies that are not authorized by the Financial Conduct Authority (FCA) or who have been issued a warning notice.
How Would I Know If An Equity Release Company Is Good?
- Research the company
- Check online reviews and look at their social media pages.
It is important to see how they interact with their customers, if they are knowledgeable about equity release plans, and what kind of experience people have had with them in general.
In a nutshell:
Equity release companies can be a great choice for those looking to downsize or retire, but some are better than others.
You want to avoid any company with high upfront fees because this means they don’t have confidence in your ability to get the money back out of your home when it’s time. You also want to make sure they offer equity-release mortgages and not just lump-sum payments, so you’ll always know how much interest will accumulate over time.