Everyone wants to retire comfortably. You may need to cover outstanding costs or live a lifestyle in your old age. With equity releasing increasing in 2022, the trend has become more of a necessity than a fad. In this article, we take a look at how equity release works and how Just retirement mortgages can be the solution for your financial concerns.
What’s Equity Release, and Who Is Eligible?
Equity release is when you take a percentage of the value of your home in the form of a lump sum.
You can use the money for various things and pay it back over 10 years.
You need to be 55 or older to qualify for equity release and be a UK resident and the homeowner.
Is Equity Release a Good Idea?
Equity release is an excellent idea if you are looking for an additional income when you retire.
The money you get from an equity release loan can help you pay for an outstanding debt or even make a particular purchase.
The Different Types of Equity Release
There are 2 different equity release plans that cater to specific needs.
The equity release plan you choose will depend on the amount of money you can qualify for and the period in which you will have to pay the money back.
Let’s take a look at the different plans:
- A home reversion mortgage allows you to sell a percentage of your home to a lender in exchange for a lump sum.
Your home will be sold when you die, and the lender will take their money back first.
If you have any beneficiaries, they will be paid the remaining sale amount if any money is left.
- A lifetime mortgage allows you to borrow a percentage of the value of your home from a lender, which you can repay over time.
If you do not pay back the total amount before you die, your beneficiaries will have the option to sell the property or to pay back the money using an alternative method.
You will still be able to live in the house while repaying your equity release.
What’s the Average Equity Release Rate?
The average equity release rate is currently 3% which is lower than the rates people paid in 2019.
According to equity release expert, John Lawson, the rate you will repay will depend on the amount you lend and can be as low as 2.75%.
How Safe Is Equity Release?
Equity release is safe for anyone who qualifies for a lifetime or home reversion plan.
There are better guides to safeguard homeowners and prevent lenders from overcharging them.
This also makes it easier to find a lender that adheres to the laws of the ERC.
- Do You Still Own Your House With Equity Release?
Yes, you still own your home with equity release.
- Will I Lose My Home?
You will not lose your home if you repay your equity release on time.
- Is Equity Release Regulated?
Yes, equity release plans are Regulated and offer protection for homeowners from the FCA.
- What Does the Equity Release Council Do?
The ERC (Equity Release Council) promotes a higher standard for products and services offered by professionals working in the equity release industry.
- Can I Still Leave an Inheritance With Equity?
Yes, you can still leave an inheritance with equity release.
Suppose you die before the mortgage is repaid, or you have taken a home reversion mortgage your beneficiaries will have the option to either pay back the lender themselves or to take whatever money is left after the lender sells the house.
Equity release has become popular over the past 5 years and will continue soaring over the next 10 years.
With the laws fully accommodating and protecting customers against the unfair practices, more people are taking advantage of equity release benefits.
Interest rates are at an all-time low, and now would be the best time to look into equity release if you think it could work for you.