Equity Release Plans – Good Or Bad?
It is commonly accepted that house prices increase during a long period of ownership and that the equity in a house after such a period is usually substantial. Substantial until it is used to move up the property ladder, and if no plans are afoot to move again the equity is a nice financial legacy to whoever is named as a beneficiary in a will.
When the bricks and mortar you purchased a long time ago are today worth several multiples of what you paid for them it can be frustrating to know that you are sitting on a large sum of money; particularly so if struggling to make ends meet. An equity release plan could be a way to enable you to tap into that substantial equity; to benefit you and maybe younger family members who are also struggling fiscally.
Equity release plans are a way of realising a large lump sum, a very tempting way; but they come at a price. Equity release means taking out a lifetime mortgage against your home; you may have a very small mortgage remaining, or you may have paid it off. Interest is accrued by the lender on a monthly basis and the lender realises all of its interest when the home is sold, either upon your death or perhaps to fund long term care. The difference with an equity release plan and a conventional mortgage is that with equity release you do not have to make monthly repayments.
There are several equity release providers on the market and obviously conditions differ with each, ordinarily though each specifies across the board that clearly substantially equity is in the property in question and that the contract is taken out by those of 55 years of age or over.
Equity release interest rates will be far greater than conventional mortgage rates, due to the unspecified period the lender has to wait before realising their interest. Some lenders enable you to make interest repayments during the equity release agreement, some do not, but you can make a separate arrangement to service monthly interest which you can use to pay off the final interest balance on the eventual sale of the property. An equity release plan does offer a swift, but perhaps long term costly, solution to raise a large sum if no other means are open to you.
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