As the demographics of our society changes so do our needs. Due to an ageing population there has been an increased demand for Equity Release Schemes.
People are living longer and accordingly many retired people are concerned that their savings will be insufficient to allow them to have the standard of living they had hoped for during their working careers. Furthermore people are finding their level of pension less than they had anticipated. Equity Release Schemes may be the financial answer for many.
As property prices have soared over the last 20 years many retired people may find they own a large capital asset in their homes but are struggling to live on their income or don’t have the extras for the luxuries in life. Equity Release Schemes can be an excellent method of unlocking your equity in your home.
Equity means the difference between the value of your house less any mortgages you have over it.
Why might you use Equity Release?
- You may wish to remain living in your existing home but want to supplement your income. Equity Release allows you to do this. Many people do not want to go down the road of down-sizing and wish to retain the family home.
- You require to top up your income. With living costs rising at an alarming rate many retired people are finding that their income is now not covering their financial needs.
- A capital sum is required for repairs and maintenance to your home.
- You may wish to go on that holiday of a lifetime.
- You may need some capital to buy a new car.
- Capital may be required to make gifts to perhaps your children or grandchildren.
- You may even use Equity Release for Inheritance Tax planning. If you spend or gift the money received from an Equity Release Scheme your assets for IHT purposes will be reduced by the debt due to the Equity Release Company on death.
- As a device to avoid Nursing Home Costs.
Before making any decisions you need to consider your own financial circumstances and consider whether Equity Release is the right option for you.
It is prudent to use up your own saving before encountering upon an Equity Release Scheme as this is far more cost efficient. Essentially the rate of interest paid on an Equity Release loan will be higher than the rate of interest which is paid on your savings.
Moreover, as an Equity Release loan will have a direct effect on your available inheritance you should always consult with your family and explain the implications of the scheme for them. It may well be that your family may come up with an alternative.
Who is eligible?
You need to be 55 or over. Some lenders will insist on you being 60. If it is a joint application the age requirement will have to be met by both applicants.
You need to be a homeowner.
In addition your house will have to meet certain requirements. For example it will have to be in a reasonable state of repair and suitable for loan purposes. You will need to obtain a surveyor’s report to confirm this.
It will also ascertain the valuation of your property.
You will also have to show that you have adequate building’s insurance.
Unlike a standard mortgage there will be no credit check or investigations into your income.
How much will I be entitled to?
The amount of equity you will be entitled to is determined by a number of factors. The equity release company will take into account the value of your property, your age, your health and your life expectancy before deciding the amount they will offer you.
There are no hard and fast rules and what is on offer will vary between lenders and the type of product you choose.
How does it work?
If accepted for an equity release loan you will receive either a capital lump sum or income both of which will be tax free. There are 2 types of scheme on offer. There is either the option of a Lifetime Mortgage or a Home Reversion Scheme.
Phone 0141 945 1917 for a FREE consultation with no obligation
974 Maryhill Road
Glasgow, G20 7TA
0141 945 1917