For many people, an equity release mortgage is a good solution to cash flow issues later in life. This kind of financial scheme allows you to stake your valuable assets – such as your property – to secure a loan, and to retain use of these in your everyday life as well.
Forms of Releasing Equity
There are several varieties of equity release scheme; some involve simply taking out a loan, while in others, the third party actually buys your property from you and delivers payments in small chunks that are deposited monthly and which become your regular income.
Two schemes: lifetime mortgage and home reversion are available to retirees. A home reversion option allows a partial or full sale of the home. Lifetime mortgages are a type of loan, which differ from your standard mortgage. The major difference is the payback requirement. You do not repay the lifetime mortgage until after death or a decision to move your home. At either point, the home is sold to recoup the value taken as the equity release. Any principle sum is paid in full and any interest that has accrued is also repaid in full. Since you take out the money to live comfortably during retirement, when you do not have income but pensions and retirement savings, it is beneficial to have no payment to make for your living arrangements.
Financially Sound Advice
If you are keen to take on this kind of scheme, you will want to ensure that you have plenty of advice and support in order to make sure that you avoid hidden costs and get the best possible deal. Solicitors who are members of ERSA will be able to help you here.
Costs are a part of equity release schemes, and for certain individuals they can be a disadvantage of these plans. High costs have been associated with equity release products, enough that certification and regulation has become an imperative element. By locating advice you can trust you can avoid some issues of the past and easily gain a product that works for your situation.
This kind of legal professional specialises in equity release law. As a result, he or she will be able to point out all the costs to you, and to assess your situation accurately in order to recommend the best product for your requirements.
Standard set up costs will vary in terms of amount. The overview here is just to discuss a couple of fees you may encounter on your way to securing home reversion or lifetime mortgage.
• Administration fees associated with sales and loans are applied. Think of these fees as the paper processing fees. Often they can be rolled into the loan amount, but each company is different.
• Solicitor fees are paid by you for your representation. The FCA, formerly FSA, requires that a homeowner is represented by a different solicitor at financial closings like lifetime mortgage loans to ensure fairness. The lender providing the funds will have an internal solicitor to represent their company.
• Appraisal of your home is needed to determine its worth and the potential loan or sale amount. Typically, the lender or buyer will require you to pay for these costs. There are a few companies that offer free evaluations or will take one that is a year or two old. If you feel your home has increased in value since the last time you looked at financial products it is important to get an appraisal of its value.
Before you sign a contract with any financial institution, review all documents, request an independent view of the documents, and make certain you are comfortable with everything stated. You are under no obligation to take a financial product; especially, if you do not feel comfortable with it. You are about to take a step that affects your financial future, your beneficiaries inheritance, and your home. Reviewing these products against other solutions is another factor.
Potential Monetary Solutions
Most individuals seeking loans or a partial home sale do so because of lack of retirement funds. After analysing the costs explore options. Can you downsize? Will your family allow you to consolidate into one household? Can your children support you and your home financially instead?
Equity release schemes are useful; however, they can also be fraught with hidden expenses. In order to help you to make sure that you navigate these successfully, it is a good idea to hire a legal professional with specialist knowledge of this field.