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Unlock the value of your homeMonday 19th November 2018
Equity Release has lately become a significant mainstream product within the mortgage market.
Having once lurked in the darkest recesses of this sector – a last resort option with a risk of losing your home to a mortgage lender – Equity Release products are now firmly part of the mortgage product family.
Set up properly, Equity Release products can provide security, a helping hand for offspring to get on the housing ladder, or home improvements. And increasingly, this option is being taken to cover a shortfall in retirement income or to repay an interest only mortgage due to mature without adequate provision for repayment.
Currently the most popular Equity Release product is a Lifetime Mortgage. Lifetime Mortgage lenders are becoming more flexible and adapting to people’s needs. For example: it’s now possible to guarantee that an agreed percentage of your home’s future value is kept for beneficiaries; ad hoc, or regular, interest payments can be made without penalty, and a cash drawdown facility can also be included.
Its popularity as a way to unlock the value of a home has also meant that regulations have become tighter for these products. Equity Release advice and lending is now fully regulated by the Financial Conduct Authority (FCA) and further safeguards are provided by the Equity Release Council (ERC). One of these safeguards is the ‘no negative equity’ guarantee, meaning that provided you’ve met the lender’s terms and conditions you, or your beneficiaries, won’t have to pay back more than your property is sold for. This is provided it is sold for the best price reasonably obtainable.
But this route isn’t for everyone and there are specific criteria to meet. Remember, it’s likely to reduce the amount you pass on to beneficiaries when you die, may restrict your moving house in the future, there are fees payable, and there could be early repayment charges. Additionally, entitlement to means-tested benefits may be affected, and it may also restrict the future amount available from your property should you need to fund long-term care.
Whether it’s right for you as an option, will depend on your circumstances. It’s crucial to take qualified advice so that you fully understand the risks and benefits before making any decision. It’s also essential to involve any dependants or potential beneficiaries in the process so they are aware of the potential outcomes.
If you are considering releasing equity from your home and would like to find out more, please call our Property Finance Advisers, Phil Moore and Sara Reed. They are fully qualified to help you through the process and explain the different options to you to establish if Equity Release is in fact the best route for you to take.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
To understand the features and risks of a Lifetime Mortgage you should ask for a personalised illustration.