You just retired and are looking forward to going on that trip around the world with your spouse, but your pension and savings aren’t enough. Well, lucky for you, if your own a home, you’re eligible for one of the best financial inventions of time – equity release. However, in spite of the incredible nature of this scheme, it involves several processes that you need to follow keenly to get the best out of it, and this guide will help you navigate through these processes.
If you know the wonders of this scheme but aren’t sure about how much equity you’re eligible to, be sure checkout Sovereignboss and use the equity release calculator and start planning for that dream home improvement today!
Equity Release Explained
Equity release, in a nutshell, is a way of releasing the wealth tied up in your property without having to move or selling it out, which you can do via series of dogmata that allow you to access – or ‘drawdown’ equity (cash) at a later date, based on your necessities, and if you are over 55. You also know that you need not have ultimately paid off your mortgage to do this.
As a rule, however, you’re allowed to take the money you release in one lump sum, in some smaller amounts on which you will pay interest, or as a combination of both. The “catch” though, is that one has to repay the income provider at a later stage, which is, at most times, when the homeowner dies. Therefore, equity release is, mostly, beneficial to the elderly who do have any intention of or are can’t leave a large estate for their heirs when they die.
Who Can Get Equity Release?
For you to take out a home equity loan, there are conditions you need to meet:
- If you want a lifetime mortgage you, (or if you’re a couple and are borrowing jointly) you need to need to be at least 55 years old
- If you want the home reversion to plan you, (or if you’re a couple and are taking out a plan (jointly) you need to be at least 65 years old
- You must own property and the said property should be your primary residence
- Your estate should be in pristine condition and over an absolute value, and depending on the plan provider; there might be restrictions on the type of property acknowledged
- If you, at the time, have a mortgage or a secured loan on your residence you may still be eligible for equity release, but it’ll be contingent to the value of your estate and the amount outstanding on the current mortgage or loan. You’ll have to pay off any outstanding mortgages or loans secured against your home at the same time as taking equity release
- Equity release may not be apt if you’ve got dependents living with you. If you have any dependents, they need to take separate legal advice. If the said dependants wish to remain living with you in the estate, then they, depending on your plan provider, may need to sign a waiver confirming they comprehend they have no right to continue living there if you die or permanently move into residential care
What Are the Cost Expectations?
When you take out the lifetime mortgage equity release, the typical rate is 5.1%, considerably higher than most conventional mortgage options. The mind-rattling price-tag your property would have to reimburse comes when you opt not to make any monthly repayments to lower the debt, so the interest keeps growing, at an alarming rate. For example, let’s say you borrow 60,000 aged 60 at 5.1% on a 160,000 estate, and the amount you are obliged to pay doubles roughly every 14 years. So, with the various chemically induced diseases and dangerous circumstances in the world today, you live until 74, and you owe around 120,000 if you happen to be lucky and live until 88 and you owe 240,000.
Therefore, in addition to the actual cost of the interest, you will have to pay arrangement fees. These can archetypally tally 1,000-3,500 in total, depending on the type of plan you choose. Your plan provider can also include costs such as application fees, legal work, and surveyor fees. You might also have to pay stamp duty. The financial market keeps changing, and you can achieve everything you’ve always wanted to with equity release plans. Don’t be shy. Just take a scheme out today!