Could your home help you have a richer retirement?
Increasing numbers of homeowners are turning to equity release to fund home renovations or clear their mortgage, and it could be cheaper and more flexible than you think.
According to the industry body the Equity Release Council (ERC) the number of loans arranged has grown by 77 per cent
over the past five years and advisers say the products have come a long way from the days of high fees and complex terms.
Equity release advisor Age Partnership dispels the most common myths when it comes to this finance option.
The rates are really high
Rates are some of the lowest on record and the number of equity release products available has grown year-on-year, which means more choice for you.
Along with the product growth, interest rates have also dropped, with the lowest been 2.50% APR – a lower rate means a lower cost of borrowing. Of course the actual rate that you can secure will depend on your individual circumstances.
I will end up paying interest on money that I don’t need right now
The most popular type of equity release is called a lifetime mortgage, with this type of product you have the option to take the money all at once or as and when you need it, this is called drawdown.
The benefit of drawdown is that you're not charged interest for the money that you don’t need right away.
I won’t be able to leave any money to my loved ones
One of the concerns people may have when considering equity release is how it will affect the inheritance they are able to leave behind when they pass on.
You can actually protect a portion of the equity in your property, this is known as an ‘inheritance protection guarantee’.
An advisor, such as Age Partnership, will tell you everything you need to know about how equity release will affect the amount of inheritance you can leave and if your entitlement to means-tested benefits could be affected now or in the future.
I will end up losing my home
Most equity release plans now carry a no negative equity guarantee. This means that neither you nor your estate will be liable to pay any more
than the property is worth when it’s sold. Plus with a lifetime mortgage, you continue to own 100% of your home and you’re safe in the knowledge that it can never be repossessed as a result of not making repayments.
Don’t forget that once you’ve repaid any standard mortgage, the money that you release can be spent achieving those goals that you’ve always dreamed of, such as carrying out renovations and improvements on your home, or providing a gift to your friends and family. Equity release may involve a lifetime mortgage which is a loan secured against your home, or a home reversion plan. There are no monthly repayments required as the money released, plus accrued interest, is repaid upon death or moving into long-term care. To understand the features and risks, ask for a personalised illustration.
Age Partnership Limited is authorised and regulated by the Financial Conduct Authority. FCA registered number
425432. Company registered in England and Wales No. 5265969. Company address: Age Partnership Limited, 2200 Century Way, Thorpe Park, Leeds, LS15 8ZB. VAT registration number
162 9355 92.