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My Complete Idiot's Guide to Equity Release

Updated on May 17, 2013
Equity release schemes are meant to be lifelong financial commitments. If you change your mind along the way, you could find yourself in a much trickier situation.
Equity release schemes are meant to be lifelong financial commitments. If you change your mind along the way, you could find yourself in a much trickier situation. | Source

As a pensioner living in the UK, you may find it extremely difficult to live on the small amount of pension that you get every month. In the direr of circumstance, you may not even have a monthly pension. However, with low rate equity releases with cashback, you can comfortably be in the safety net of financial comfort for the rest of your retirement years. You will however be required to have ownership to real estate property before you can qualify for an equity release scheme. Fortunately, for many people in the UK, most of their equity is tied up in their houses.

The fact that you do not have to move out of your home even after you sell your house to an equity release provider has made equity release a more viable way to safeguard their finances in old age. It is only after you pass away or you move to a long-term care facility that the equity release provider will sell your house. Even then your beneficiaries will still be entitled to part of the sale amount if the value of your house exceeds the amount that you had received as equity release.

Equity release borrowers can choose from two broad categories of schemes. You can either choose to have the money tied to the value of your house released to you as a lump sum. Or have it as a pot from where you can make regular withdrawals when you are in need.

In both scenarios, you will want to calculate the amount you can borrow against the value of your house. With most low rate equity release providers, you can borrow up to 55% on the value of your house. You can use our online equity release calculator to calculate the exact amount you are eligible to receive.

After receiving your money, you can choose to spend it almost on anything. Previous research has shown that most Brits are borrowing equity release and using the funds to repay their mortgages.

Keynotes for Equity Release Borrowers

Equity release schemes are meant to be lifelong financial commitments. If you change your mind along the way, you could find yourself in a much trickier situation. You therefore need to be sure that low rate equity release with cashback is the best option for you. At the very least, talk to your family to seek their advice about your decision. You should also consider enlisting the services of an expert in equity release before you decide to sign on your property.

Pensioners should also not that tying their property on equity release slightly decreases the value of the property. This could have negative effects on the beneficiaries.

Is Equity Release the Best Option for Pensioners?

Equity release sounds like an ostensibly great idea for pensioners, but is it really? Yes, equity release is by far the best option for retirees, but to make it work for you, you have to do your homework. Talk to impartial financial advisors and carry out general research about equity release providers who operate in your locality.

You can use the money you release from the value of your home to offset your mortgage
You can use the money you release from the value of your home to offset your mortgage | Source

Common Myths about Equity Release

The issue of equity release has always drawn mixed reactions from financial advisors, media and other key stakeholders. There are those who maintain that using equity release amounts to tying a financial noose around your neck. Others are more positive about it and view it as a channel to financial stability in retirement years.

For those looking for a neutral opinion about low equity release rates with cashback, we have gathered the good, the bad and the ugly of equity release in this exclusive blog article:

Debunking the Myths

  • Taking Out an Equity Release Plan does not jeopardize your home Ownership Rights

Many people have a conception that using equity release somehow inhibits or curtails the homeowners’ full rights of their house. Things could never be far from the truth. Equity release guarantees you the full rights of ownership to your home for the whole duration of your life.

  • Market Fluctuations Will not affect your Equity release plan

The question of what would happen in case the real estate market takes a dive remains perturbing to many people. Market fluctuations will not actually result to the homeowner owing more than the value of their homes. The truth is that all providers of equity release pledge to a ‘no negative guarantee’ which ensures that no debt will ever be left on the property. You can use our online equity release calculator to calculate the value of your property.

  • Equity Release Will Deny my heirs an Inheritance

67% of the people believe that by releasing equity on your property, you are essentially denying your heirs an inheritance. The truth is that once the homeowner passes away, the property will be sold, and the providers will only take as much as there are owned and hand the rest of the amount to the heirs.

  • You Won’t be able to move houses

Equity release does not tie you to your property. You can conveniently move your equity release to another valuable and suitable property without attracting any financial penalty. By calculating the value of your new property, you can estimate whether it guarantees you the same amount of equity release you were getting from your previous property.

  • Equity Release is Illegitimate and Unregulated

Like any other business, there is legitimate business entrepreneurs and illegitimate cons. Choose to deal with a SHIP licensed equity release and you will be safe.

Who is eligible for equity release?

After debunking the above myths, the question that many people ask is “am I eligible to receive low equity release with cashback?”

Here is a quick checklist for eligibility to receive Low equity release rates with cashback:

  • Only available for people above 55 years of age
  • Minimum property value must be €60,000
  • Property must be in England, wales, Scotland or Northern Wales
  • If in a leasehold property, your must have, in most instances, at least 75 unexpired years on your leasehold
  • Your equity release amount must be able to cover your remaining mortgage. Use our online calculator to calculate how much equity release you are eligible for.

It is also important to note that some properties such as houseboats, mobile homes and park homes do not qualify for equity release.

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