Equity release is a kind of financing which allows you to tap into the value of your property without having to sell it. It’s becoming increasingly popular with retirees, who can use it to supplement their pension income.
The amount you can borrow depends on how much equity (the difference between the market value and loan amount) there is in your property and how much interest rates are at the time of application. You’ll also need to take into account any fees associated with taking out an equity release mortgage, which are often quite high.
Pros and Cons of Equity Release
There are a number of benefits to equity release, but it’s important to be aware of the drawbacks as well.
You can use the money for any purpose you want! If you want to travel or buy something special, then you can do so with your equity release funds.
It allows you to live in a home that meets your needs and desires without having to worry about paying for it every month.
The interest rates on these loans tend to be higher than those offered by traditional lenders like banks or credit unions; however, this may still be worth considering if it means being able to afford something better than what you currently own (or even just stay where you are).
Who can apply for equity release?
If you’re over 55, have a property to sell and want to make sure that it’s worth as much as possible, then equity release could be the answer. It’s also a good option if you want to use your home as security against borrowing money without having to sell it outright. But there are some eligibility requirements that need to be met before an equity release lender will consider your application.
What do I need before applying?
In order to qualify for an equity release product, applicants must:
* Be aged 55 or older;
* Own their own home (or part share) outright with no mortgage attached;
* Been residing in the property for a minimum of three years;
* Be able – physically and mentally -to look after themselves in their own home;
Tax Implications of Equity Release
The tax treatment of equity release is complex and can vary depending on your circumstances. It’s important to note that the amount you pay in interest will be deducted from any capital gains tax payable on your property when it comes time for you to sell it, so if you’re considering selling up in order to raise funds for other things (such as paying off debts), then this may be something worth looking into further.
If you have any questions about whether equity release is right for your situation or if there are other ways of raising money without having to sell up, speak with an advisor who specialises in this area today!
How to Compare Equity Release Options
When comparing equity release products, there are several factors to consider. These include:
The interest rate and fees charged by the lender. Higher interest rates will result in a higher monthly payment, while lower ones mean you’ll pay less each month but take longer to repay your loan. Fees can include an application fee and/or an annual administration charge (AAC). The AAC covers the costs of processing your application and managing your account with the lender over time; it’s usually charged annually or quarterly based on how much money you borrow from them over 12 months or three months respectively. Some lenders also charge early repayment penalties if you want to pay off an equity release plan early–this is usually between 1% and 2% of what’s left outstanding on your loan balance at that point in time. Contact us for more information or for any equity release advice.