Equity Release

A Look at Equity Release Schemes

Equity release schemes are often confused with mortgages, so it is first important to clarify the major differences. Equity release packages allow a property owner to leverage the value of their home in order to generate an additional source of income. The main takeaway point is that a mortgage will first have to be completely paid off. Furthermore, there are many times when the applicant is not required to pay any interest while still living at their residence.

The Benefits of an Equity Release Mortgage

An equity release mortgage offers several unique advantages. For example, a portion of the value of the home can be released while still living in the property without worrying about paying any type of rent. Any funds which are liberated will not be subject to capital gains tax. Furthermore, any debt that may be accrued by the policyholder will not transfer the the property upon his or her death. This is known as a “no-negative equity guarantee”.

Are There Any Variants to Take Into Account?

Keep in mind that these plans essentially involve borrowing against the value of your home. Therefore, certain instances may dictate that downsizing to a smaller (and more manageable) property could represent the better option. Another consideration involves interest rates. At the time that this article was written, rates generally range between five and six per cent. It is wise to opt for plans which offer lower rates, as this reduces the amount of money that will ultimately need to be repaid. On a final note, keep in mind that there may be times when you wish to sell your home. In this case, you will tend to receive between 20 and 60 per cent of its current market value (depending upon the provider). This is why it is a good idea to consult with various firms in order to determine how much they are willing to offer if you are planning a sale in the future.

Making the Correct Decision

The main question involves whether or not equity release is a good idea. This will depend upon several variables such as:

  • Whether or not your family’s inheritance may be affected.
  • The presence of fixed or variable interest rates.
  • Any stipulations put forth by the company in the event that you wish to relocate to a different property.

Take a look at the top equity release providers in order to obtain a basic understanding of what each has to offer. It is best to opt for a service which is associated with lower interest rates and more flexible policy terms. Most experts also recommend to only work with firms which are members of the nationally recognised Equity Release Council.

The Top UK Providers of Equity Release Mortgages

Keep in mind that any type of equity release programme represents a very real investment. This is why choosing the appropriate firm is critical. Here are the top four providers in the United Kingdom as well as what they have to offer:

  • More2Life: Lump sums as high as £1.85 million pounds.
  • Pure Retirement: Plans offering entirely fixed interest rates.
  • LV: Flexible Lifetime Mortgage plans offering 5.4% APR.
  • Hodge Lifetime: No early repayment fees.

As always, it is prudent to examine each of these deals in greater detail.

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