Do your homework before you choose to opt for equity release
release to pay off an interest-only mortgage you should speak to your current lender about the options available to you. Equity release could also affect your entitlement to state benefits and will ultimately reduce the value of your estate upon death.
However, equity release does have some benefits.
If you have owned your home for many years the chances are it is worth more now than it was when you purchased.
This can allow you to unlock a tax-free sum to use as a supplement to your income, provide your children with an early inheritance or help your grandchildren on the property ladder.
You should consider what type of equity release would be best for you. Currently there are two options; Home Reversion Plan and Lifetime Mortgage.
The latter allows you to stay in your home by giving you a loan which will to paid upon death or if you move into long-term care. The former also allows you to stay in your home but involves selling all or part of your home to an investment company. You will receive a lump-sum or income as a result and can stay in your home rent free. However, when your home is sold the agreed percentage of the sale goes to the investment company and the remainder to you.
Don’t assume this is an easy fix if you do have an outstanding mortgage or any loans secured against your home.
You will need to pay these off completely with any equity you release. Also, the value of your property can go up or down so be mindful of the interest rates you are offered.
Ultimately this is a big decision. Please make sure you take good advice from an independent adviser. I would also advise you look at www. equityreleasecouncil.com to make sure your final decision is right for you and your family.
Q: My husband and I are currently taking a mortgage and have been urged to look at life insurance cover before prices rise through the EU Gender Directive. What bearing will this ruling have on me?
A: I’m so glad you asked this question. First, if you value your investment in your home, and want to ensure that investment is protected for you and your family, then you really should take out a life insurance policy. But do that now before prices increase.
By law from December 21 women can no longer be charged less for life insurance than men. It may come as news to you that women have always paid less than men because statistically women live longer.
However, come December 21 women will be on the same playing field as men.
Although there is limited information out there as to the precise impact some commentators are predicting up to a 20 per cent increase in the average policy premiums for women.
I suspect this is likely to be the case, along with a small decrease in average premiums for men.
Contemplating your own death isn’t something we like to do but I would urge you to take out a policy considering you are about to take on the responsibility of a mortgage.
With such a huge debt you have to be realistic about what would happen if you died. Will your family manage? Will the bills get paid? Take a good look at the options available to you and don’t just go with the first policy presented to you..
Franz Muelthaler is mortgage adviser with Holroyd Miller estate agents in Wakefield and Dewsbury, www.holroydmiller. co.uk