Deciding My Future – Are Equity Release Schemes Right For Me?
Before you sign up to any financial program you need to do your research and no more is this true, then with an equity release scheme. This requires careful consideration when looking at making use of the equity built up in your home for financial security whilst you are alive. You may have many questions and that is where we recommend you speak to an independent financial advisor about your particular needs and requirements so that you can decide if equity release is right for you. However in spite of this we have listed some general positives and negatives below for and against the scheme to help you get started.
There are many positives to releasing equity, these include releasing a large amount of capital from the value of your property without having to move house to do it! The money that is raised can be spent in whatever way you see fit and on whatever you want. You can live in your home for as long as you are alive or wish to live there. Instead of a one off fee you can instead get what is called an annuity and receive regular monthly income until you die, this is especially good if you think you may spend the lump sum if you have it. If the house market recovers and your home increases further in value then you will benefit from the future hike in house prices and you can also get staggered release of the funds to you if you so wish, which is therefore three unique ways of getting the money built up in the equity of your property.
Like many things, there are drawbacks to equity release as well in some circumstance, these include leaving less money or inheritance to your family and friends, because you have negotiated with the equity in your home. If you do not have family, this may be a plus point however. Equity release schemes are only available to persons aged over the age of 55 usually. The agreements and schemes in place can be rigid and inflexible and so should be considered carefully as long term commitment. As months pass by, interest is added to the loan balance of which you have loaned and the longer it is running the more of your equity is used up. This will give a reduced surplus when your estate is sold on. You may only be able to release around 20-25% of the value of your home, which may not be adequate for your needs. The interest rates charged on the equity release loan have been traditionally high but are now closer to traditional home loan rates. Taking equity release will affect your state benefits and the entitlement you may be allowed.
Like with anything, finding out if equity release is right for you is crucial before you commit to any program, that is why it is always best to speak to financial advisors and ask questions that you will have that haven’t been answered above, in that way you can paint the full picture about equity release in your mind.