There has been a growth in the financial products that lenders are rolling out. Equity release has become popular with older people. With the new equity release rules set by the ERC in March 2022, the safety of releasing equity is no longer a concern. The top equity release companies predict a spike in the future.
How Does Equity Release Work?
Equity release works like a loan against the value of your property.
You can use the money for anything you need and pay the mortgage loan over 10 years.
Why’s Equity Release So Expensive?
Equity release is expensive because of the impact of the compound interest.
The interest rate is also set at an estimated 6% making equity release great for people wanting to save money but difficult for anyone needing to borrow money.
Is Equity Release a Good Idea?
Yes, it is a good idea to release equity if you need a large sum of money to cover certain costs.
You may want to secure an income during your retirement or use the money for home renovations or a holiday.
There are various reasons why equity release is a good idea, and there are no restrictions on what you need to do with the money.
How Safe Is Equity Release?
Equity release is safe enough to secure the income of many people who need a lump sum payout.
With higher safeguarding levels and stricter codes of conduct set for lenders, customers can rest assured about the products they choose.
What’s the Average Equity Release Rate in 2022?
The average equity release rate is 3.95 based on lifetime mortgage plans.
There has been a drop in the interest rate since 2019, and at its lowest can be as little as 2.75%.
According to equity release expert, Jason Stubbs, the lending rates will continue stabilising and give more people the opportunity to use their homes for income during retirement.
What Are the Equity Release Options for Older People?
The options that older people have for equity release depend on their age.
You have to be between 55 and 65 to qualify for equity release.
As an applicant, you would still need to apply for equity release like you would use for your first mortgage and will need an advisor to assist you.
What Do You Need to Apply for Equity Release?
When applying for equity release, you will need the same documentation as you would for your first mortgage application.
Let’s take a look at what you will need:
- Your credit record will need to be updated to qualify for the loan.
- You need proof of residence to prove that you live at home and would like to release equity.
- You need your ID
- You will need proof of employment if you are releasing equity from the age of 55 or if you are still employed.
Can I Release Equity Under the Age of 55?
To release equity under 55, you may need to look at a different range of products.
You should, however, be mindful of the debt you take against your home at a younger age.
With an equity release calculator, you can see what you qualify for and then approach brokers and lenders to apply for equity.
- How much will my equity release plan cost?
An equity release plan will cost between £2000 – £3000, but not all equity release plans will be that high.
Some equity release plans don’t require a lender’s application or survey fee.
After you factor in the compound rates, the cost becomes higher.
The rise in equity release loans is estimated to increase over the next 10 years.
With the interest rates at an all-time low, it is the perfect time to look at equity release.
If you are unsure of the costs but want to avoid paying a financial advisor for advice, consider online consultations to get an idea of what you could be in for.