24 April 2014
Equity Release
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To Get Independent Financial Advice Always Seek The Professionals

Advice on an equity release plan must begin with a familiarization with the protocols of the different processes involved with each type of equity release scheme that exists. Essentially, an equity release is a means of extracting money from a property asset, typically a main residence that a person can use at their discretion. This cash is tax-free and does not come with the requirement of having to make any monthly repayments. In order to get the best advice you need to approach a professional Equity Release advisor.

At present, there are three main types of equity release packages/plans: home reversion plans, lifetime mortgage, and drawdown lifetime mortgages. A lifetime mortgage gives you a tax-free sum of money, usually with no monthly repayments attached. You are allowed to live in your home until you and your spouse pass away or unable to live there. The best advice on equity release is to consider what sort of plan is best for the consideration of how much to leave behind for your loved-ones. With the compounding interest being added on an annual basis, the loan, plus interest, (which approximately doubles every 10-11 years) with any remainder from the sale of your property is paid out at the time of your death.

A drawdown lifetime mortgage operates in much the same way as an ordinary lifetime mortgage except that you can draw money as & when you require it, in stages. This is probably the most popular equity release scheme today. Advice for this equity release is to carefully consider exactly how much cash is needed initially, and how much should be left for future withdrawals. You will need to estimate what sort of income is expected in the future, because it is possible to preserve much of the value of your property in this plan.

If guaranteeing an inheritance is best advice for you then a home reversion would be considered the most comprehensive and safe option. Home reversion plans allow you to sell a part or all of your home in exchange for a lump sum of money. Again, there are no monthly repayments made with the loan, with NO interest element being charged. To calculate how much will be left to the beneficiaries, would be determined by how much of the property was not sold to the reversion company. Therefore if only a 40% reversion is transacted, then 60% of the final sale value will still pass into your estate when you and your partner pass away. Finally, a home reversion plan can also be taken on a drawdown basis as you can sell further percentages of the property in the future. Such a scheme is provided by Bridgewater.

To summarise, the advantages of equity release plans are: allowing you to pay off any mortgages that you may still have; pay off any outstanding loans; make home improvements; upgrade your motor vehicle; go on holiday; and improve or maintain your lifestyle.

This is the basic advice on equity release that is typically given to those considering to use it although it is always good to consult your equity release advisor first so he can compare all the equity release schemes.

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