If you are thinking about releasing equity from your home, there are many factors to consider. We have compiled a shortlist of 5 top equity release tips to help guide and inform you when making decisions.
As Equity Release Advisers we understand how important it is for homeowners to have the knowledge and information they need to make the most suitable decisions for their circumstances.
Here are 5 essential factors to consider when releasing equity from your home:
- Do you want to leave an inheritance to your family and loved ones?
Some equity release plans enable you to ring-fence a portion of your property wealth to ensure that you leave an inheritance to your family.
If leaving an inheritance is something you wish to do, it is vital that you mention this when speaking to an equity release adviser. They can make sure that the plan you take out comes with inheritance protection, for example, a protected lifetime mortgage or a home reversion plan.
2. Do you want the flexibility to move home in the future?
All equity release plans that meet Equity Release Council standards allow you to move home and transfer your equity release mortgage to a different property subject to terms and conditions.
If you think you might move home in the future, it is important to mention this when talking to your adviser. They can make sure that the plan you select meets your needs both now and in the future, and that you understand the terms and conditions attached to your equity release mortgage in relation to moving property.
3. Only borrow what you need when you need it.
It may be tempting to release all the money you wish to borrow in one go, however, once you release funds the interest payable on the loan begins to accumulate. This means you would end up owing more over the long term because the interest has longer to compound. With this in mind, you should borrow only what you need in the short term and wait until you need to access cash again in the future.
Drawdown lifetime mortgages are designed to facilitate this approach to releasing funds.
4. Consider making voluntary repayments.
With equity release mortgages, borrowers are not obliged to make loan repayments. However, if you wish to make repayments you can. A voluntary payment lifetime mortgage allows you to make repayments to pay off the interest of the loan. You have the flexibility to pay some of the interest, all the interest, or more than the interest.
By paying the interest off during the life of the plan, you can avoid compound interest and retain as much equity in your property as possible.
Interest payments are considered ‘voluntary’ and so you can stop making payments at any time, and instead, add the interest to the loan. You can then begin making payments again at a later date if you wish to.
5. Find a qualified Equity Release specialist that you can trust.
The Equity Release Council is the industry regulatory body for the UK equity release sector. The council represents providers, financial advisers, solicitors, and intermediaries.
When looking for professional equity release services make sure that the firms you work with are members of the Equity Release Council. All members must abide by certain rules and standards that are in place to protect borrowers. For example, all members must promise a “no negative equity guarantee”, this means that you will never owe more than your property is worth when it is sold.
Personal Retirement Planning is a proud member of the Equity Release Council. We are independent equity release brokers providing impartial and specialist advice tailored to our clients’ requirements. We compare plans from multiple lenders to find the most suitable options for your individual circumstances.
We hope you found these tips useful, if you would like to learn more and speak to an Equity Release Specialist, please call Barry Leigh on 07980 210 953 or email firstname.lastname@example.org.