Do your home­work be­fore you choose to opt for eq­uity re­lease

Yorkshire Post - Property - - PROPERTY -

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

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