The cost of equity release schemes has fallen by around 1% in the last year that might sound insignificant, but on a long-term lifetime mortgage, it can make a massive difference. If your mortgage is a big amount it is possible that you could save money but go to another provider, schemes are designed to allow people to access money tied up in their homes are falling in cost and advisers are saying that people who have existing equity release may be able to save money by switching deals.
In the current scenario, the equity option has become a popular choice for the people who are looking for ways to release more capital from their property without getting onto the option to sell them! Interestingly, counting back on the numbers, sales have nearly seen to double over the five years to 2018. This study is according to the data from the Financial Conduct Authority. To keep up with the ever increasing demand, the product options increased from 86 in January 2018 to 221 in January 2019!
In deeper with the current context!
The equity release market is all set to become the most popular choice throughout the coronavirus crisis for people looking for ways to raise cash. Indeed, with the equity release age starting at 55, if you are working or have a mortgage can first think of the fact to get the payback for your financial terms.
Whether you are looking at equity release now or considering it later on, it is imperative that you seek financial advice and take the time to understand all your options before making a commitment.
Some common questions regarding equity release schemes:-
What is equity release? Some people think that these schemes are hard to understand but they are not. This is a simple scheme with the sole intention of helping OAPs. With the help of equity release schemes you can release money stored in your property when you need it without having to move out. You release tax free cash, which allows you to spend it on what you want.
Do you require professional advice? If you are not handy with legal information it is advisable to go for professional advice. With the help of a professional you can be reassured that you will get through the process quickly and smoothly without any problems. It is also worth knowing that equity release experts can explain the entire process in detail and also in simple and understandable terms without getting confused. If speed of completion is also an important factor then an experienced advisor will also have an equity release solicitor.
Why opt for equity release schemes?
If you do not have a fixed source of income during retirement and the monetary budget is tight, it may be advisable to opt. When you receive cash from the release, you can spend it in any way that you wish for many, it acts as financial freedom at a time when income has fallen but expenditures have risen.
What is happening with the rates?
Interestingly, the rates for equity release deals have known to hit record lows in March 2020. Now, the average rate owing to the current context is fixed at 4.2%. It is to note that this figure is not the same all the time. Indeed, interest rates could increase or decrease over time. If you are looking for a profitable deal for the equity deals to fit in your requisites for the current situation, your financial advisor can be the best person to deal with.
How can you keep the costs down?
It has been observed that the equity release market is on an evolution that offers greater options as choice and enhanced flexibility. You can find some lenders who allow you to make regular interest payments on the mortgage. This process helps you to keep the long-term costs down.
What do you understand by drawdown lifetime mortgage?
If you are looking for equity options in the current scenario, there are true, many options available for you. Here is another innovation in the lifetime mortgage market with the introduction of the drawdown plans to meet all your requisites. These plans allow you to take equity as per your need. In short, you do not have to take a lump sum upfront from now on! For instance, you could now opt for a loan of $40,000, with an initial taking of just $30,000.
Is the equity option really safe?
Do you know equity release earned a bad name in the 1980s and 90s when the world market was poorly regulated? Thousands of borrowers ended up owing much more than what their house was worth. Later it was found that their estate was not enough to back the loan they had. Eventually, many lenders pursued borrowers’ children to settle the raised debts after their parents died.
What is no negative equity guarantee?
Now, the times have changed, and so does the situation for the equity release. The majority of equity release products now come with a no negative equity guarantee. This means that if you owe an amount, that can never surpass the value of your house.
Indeed, there are some products that allow you to ring-fence through a certain amount of cash that gets passed to your beneficiaries. It is done regardless of the amount of interest that gets accumulated.
Thus, lenders have to be clear about the cost and usage of their products for a profitable approach and the rate at which interest accumulates.
How much can you borrow?
The amount that you can borrow is largely determined by your age and the value of the property you are referring to for the purchase. Sometimes, your health status may also be counted for deciding the amount. According to the Firms website calculator, someone aged 75 with 300,000 Euros can opt for a typical borrow amount of:
- 145,500 Euro from Just.
- 145,500 Euro from Legal and General
With some other denomination aspects for these figures, those figures may rise considerably more.
Apart from the above considerations, what about the Rio mortgages?
These are a new type of interest-only mortgage for older people, and they might portray a good appeal to those who are put off by the idea of equity release, Rio mortgages are considered to be the most effective standard home loan deals with a big difference from that of the equity release. Here the mortgage does not have a specific end date and is usually carried till the borrowers’ death or when they move into a care home.
The bottom line
When opting for releasing equity, it is essential to understand your current needs and also count in the various future scope for the present requirements. This is because if you are opting for using a portion of your property now, it may have a more significant impact on the value of wealth in the future.