AppId is over the quota
So many people are struggling with this prolonged recession. Listening to the news, it doesn't look to be getting any better any time soon. Meanwhile, those who recently retired thinking they had a large enough nest egg or pension to support them, have watched the markets slash the value of their investments and pensions, while interest rates keep savings accounts providing little or no value at all. Some people just need a bit of extra help financially, for themselves or others in their family. These people should seriously consider home equity release schemes.
What is equity release?
The basic definition of equity release is simply finding a way of getting money out of an investment. For most people, the most important investment they have is their home, so most plans are mortgages on property assets called lifetime mortgages. These are not a standard mortgage, the kind that has just been paid off once retirement has been reached. Rather they are a specialist lifetime mortgage that has specific features for the people over 55 years of age that they are restricted to.
A lifetime mortgage is principally the same as re-mortgaging your home. However, the financial adviser who helps you set up the equity release plan has a number of potential options to offer any prospective applicant. Some people like having their equity release loan paid to them in a single, one-off lump sum - just like a traditional mortgage. Others may require the tax free lump sum to be paid in stages, rather than all at once. A less common request is for the money to be paid as a regular income.
What can the tax-free cash be used for?
This arrangement is excellent for someone looking to enhance their retirement lifestyle by way of renovating their home, build an extension or make a gift to their children. By re-investing funds taken out of your property will have a longer term positive effect on the final value of the property once it is sold. This will be of interest to your children & their inheritance.
Therefore, people looking at a release of equity should not consider lifetime mortgages as a poor choice, as although they are taking cash out, they are upgrading the home & hopefully adding or helping to retain its value.
What are the different options?
There are further options available to any potential applicant when considering equity release schemes. They can now pay the interest on a monthly basis, therefore keeping the size of the equity release loan fixed. This example is a fixed interest only lifetime mortgage, and a great way of keeping the size of debt under control.
These plans have been given much thought as there is also the flexibility to select how much of the interest you wish to pay. Therefore, you can work within your own budget.
Another option for those looking to supplement their savings or pensions is the ability to release the equity release funds slowly; with the tax free cash being withdrawn in smaller increments as a wage would. This means that an additional amount of funds can be made available on a monthly basis, making it easy to supplement pensions or savings and not have to return to work or sell the home entirely.
If you prefer flexibility of when & how much you withdraw then a drawdown equity release plan can be considered. After taking an initial tranche of cash from a facility created by the loan provider, you then can draw ad-hoc payments from thus reserve whenever required. Therefore, if a new car, boiler or holiday requires payment the funds are accessible within a 1-2 week window.
In both of these examples, the value of the home equity release loan can be repaid if the home is sold; either if downsizing, or if the policy holders move into care. Alternatively, when the inheritance estate is dispersed, the equity release loan will be a part of the liability on the value of the house.
How is ta lime mortgage repaid?
Once the residence is sold, then the equity release plan is repaid. Alternatively, if a member of the family wishes to retain ownership of the property, maybe for letting or investment purposes, they will pay back the equity release loan - possibly through a residential or buy-to-let mortgage arrangement.
However, what is important is that there are options for those struggling financially in their retirement, when sitting on a large family home. Often people feel that financing the home might be shifting a debt to the next generation, but it is associated with a property asset - and therefore passes on the option of keeping the family home, or selling it at a later time. Hopefully, once property values do start to rise it may have better market values than during the current recession.
In summary, the options that lifetime mortgages present can be very helpful to those who need some extra money. They can be helpful in their timeliness, they are available and can be completed in a relatively short period of time (compared to that of selling a home). They include features which are likely to be agreeable and attractive to the over 55's who are looking for this support as well.
Mark Greggs is the founder of Equity Release Supermarket who were recently accredited 'Best Financial Advisers' at the Equity Release Awards 2008.
Mark is an experienced Independent Financial Adviser who has now been providing quality equity release advice for the past 12 years.
Gained with this experience is exclusivity to deals with some of the UK's leading financial providers.
Mark aims to pass on his experience in assisting the over 55's decide whether equity release is the right choice for them.
For further information or to compare equity release deals available go to: -
http://www.equityreleasesupermarket.co.uk/
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