Saturday April 28, 2018
Continuing The Finance Roome’s focus on Equity Release, today we take a look at what it actually means and we also point out what to beware of if you are considering this.
Basically, equity release is a bit like a normal mortgage but without monthly repayments and is (usually) only open to the over 55’s. Instead of borrowing money to buy a house, the equity release company hands over a chunk of money for the borrower to spend however he or she wants. Borrowers can release up to 50% of the value of their home depending on their age – but the interest rates are typically fixed at 6 to 7.5 percent, meaning in 11 years the amount of money owed will double. In simple terms this debt then has to be repaid when the homeowner dies. Hence the very real need for expert advice. Click this link to be taken directly to our website information page.
If you are considering using an equity release mortgage to pay off debts be minded that the interest rate makes this very costly and can quickly eat away the life savings locked into your home.
When borrowing to help your children – for example funding a deposit on a house – don’t forget it costs far more to provide for them now than it would if you left the money to them as an inheritance. This needs to be weighed up of course as it is usually “now” that offspring need this help.
We are often asked what would happen regarding care home fees – the average cost of these currently is £26,000 annually; 24,500 homes had to be sold last year to pay for care. Should you be looking at equity release and are worried about your ability to pay for the care YOU would like in the future, do not release more equity than you need.
The most common reason for opting to release equity is to fund retirement. It is vital that borrowers work out a sensible budget; a draw down lifetime mortgage will suit many as it allows the borrower to tap into their cash slowly and removes the lure of a big splurge at the outset leaving them short changed.
If you would like to know more regarding the above please do call our Director Ellen Roome; she is our expert in the field of equity release and will be delighted to help. Call Ellen on 01242266353 or simply email us at email@example.com and we will get back to you straight away.