Reader’s Digest's 5 Top Tips on Equity Release
As equity release becomes an increasingly popular part of the retirement planning process, more people are becoming aware of the benefits and risks involved. If you have been considering equity release you may know some of the broad strokes.
The key facts that are important to know about a Lifetime Mortgage (the UK’s most popular type of equity release on the market today) are:
- You retain 100% ownership of your property
- You must be over the age of 55
- You must own your own home (although you can still qualify if you have an outstanding mortgage, provided the amount can be cleared by the release)
- The amount you can release will vary, depending on your age and property value, and so can increase over time.
The Reader’s Digest Equity Release Service offers some lesser-known ‘Top-Tips’ about Lifetime Mortgages and what to consider when deciding if equity release is right for you.
1. Advice is essential
Releasing equity from your home will reduce the value of your estate and can affect your entitlement to means-tested benefits. The finer details of equity release, including the features and risks, can be best explained by a qualified equity release adviser. With a nationwide adviser force, Reader’s Digest can put you in touch with expert, local advisers who can explore your eligibility and available options. By receiving professional impartial advice, you can reach a more informed decision and can tailor your plan to your needs. A specialist adviser can also provide you with a personalised illustration, detailing how much you would owe over time, and allowing you to decide if equity release is the right decision for now and for the future.
2. Have a clear idea of your financial needs
Knowing how much money you need and what you need it for will help your adviser to find the right kind of plan for you. There are a variety of plans which can maximize the amount available to you, minimise the interest build up over time, or give you access to reserve funds to draw from at a later date. If you have an existing mortgage, then the outstanding mortgage amount will need to be cleared by the amount you release or through any additional savings. Our customers release equity for a wide range of reasons, including to make home improvements, help out the family, or boost their disposable income.
Whatever you plan to do with your released equity, having an idea of how much you would like to release is a great place to start. You can use this handy calculator to get an estimate of how much you may be eligible to release.
3. Considering the alternatives
Equity release might not be your only option when it comes to freeing up some extra cash. Over 55’s in the UK are also choosing to sell up and downsize to a cheaper home, or rent out a room in their home in order to make the most of their property. Should you choose to meet with a Reader’s Digest equity release adviser, they will talk you through all of the alternatives to equity release, which includes exploring your benefits entitlement.
4. Take note of the repayment option
If you have a sufficient income you can opt for an interest and capital repayments plan. One year into the plan you can start making repayments of up to 10% per year. By making optional monthly repayments you can reduce the build-up of interest on your Lifetime Mortgage loan and maximise the amount of inheritance you leave to your heirs.
If at any point you choose to stop making payments, the plan can revert to a Roll-up or Traditional Lifetime Mortgage which can come in handy if your circumstances change. As you maintain 100% home ownership with any Lifetime Mortgage plan recommended by Reader’s Digest Equity Release you will never be at risk of repossession. The loan is instead repaid when you pass away or move into long-term care, typically through the sale of the property.
5. Involve family and trusted friends in your decision
Equity release involves taking money from your property now, which means there will be a reduced estate for your heirs later. Some plans offer the option to ring-fence a portion of your property value as inheritance, which will then be untouched by the lender, however it is recommended to involve your heirs and/or trusted friends in your decision as they will be the ones talking to your equity release provider once you pass away.
Family and friends can also provide a good second opinion and getting them involved at the appointment stage means that they are also more informed of the options and the reasons for your decision.
These tips are offered to help you better understand equity release; however, you may have further questions which are not answered here. You can contact us on 0800 029 1233 to learn more or to arrange a no-obligation appointment with one of our financial advisers.
A Lifetime Mortgage may impact the value of your estate and could affect your entitlement to means-tested benefits. Think carefully before securing other debts against your home. To understand the features and risks ask for a personalised illustration. Reader's Digest Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (https://register.fca.org.uk/) under reference 610205. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,690. Our adviser will talk through the setting up costs of a Lifetime Mortgage before you make any decision to proceed.
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