There are still many people who believe that Equity Release mortgages should be avoided at all costs. Do they have a point? I have had this conversation with many “professionals” such as solicitors/accountants with interesting outcomes. The fears they tell me about include “there will be no inheritance left for children”. “They are very expensive”. “You could lose your home”. “You will no longer own your home”. Very serious concerns indeed, but thankfully all of them can be cast aside as Equity Release mortgages are none of these things. Compared to what was available just a few years ago, the security, choice, features and benefits of Equity Release mortgages are huge! Interest rates are at an all time low and are fixed on day one of mortgage and never change – not a lot of people know that! An Inheritance Guarantee can be added to your mortgage which means that a chosen percentage of the value of your home will ALWAYS be paid to your chosen beneficiaries – not a lot of people know that. You maintain FULL ownership of your home – not a lot of people know that. All in all, Equity Release mortgages were reborn some years ago and are not the same beast that they were in the 90’s. Sadly, they have not shaken off the bad reputation they earned back then. Another VERY important point to note is that they are often confused with Home Reversion Plans – a completely different arrangement. A Home Reversion DOES mean that you will no longer own your home. In exchange for an agreed sum paid to the client at the outset, the lender takes ownership of the property. This WILL result in you not owning your home and it means that there will be NO property inheritance for your children! These are NOT the same as Equity Release and in my opinion deserve the bad rep that they get. Many people are taking the time to learn more about these products that can be life changing. At The Independent Mortgage Partnership, we are happy to talk you through everything, giving you unbiased, honest advice. You can then decide what you think of Equity Release mortgages and know if it something that could be for you.
More and more I am meeting with clients who have found themselves facing financial hardship as a result of accumulating debt in retirement. In some situation, the fact that the loan/credit card was approved given their financial circumstances at time of applying was questionable. nonetheless, for some it has resulted in having to live hand to mouth as after the monthly payments are made to the various credit commitments, there is little of the pension income left.
Luckily for some, there is a wealth of equity tied up in their home. Releasing a portion of this is allowing them to clear their feet which in turn eliminates monthly payments and therefore increases their disposable income. The improvement to so many lives has been immense! Gone is the misery of having little or no money and welcomed are the doors opening to a much improved lifestyle.
Mr & Mrs X owned a home which was valued at £200,000. Over the years they had accumulated debts of over £20,000 on various credit cards and further £7,000 personal loan. The monthly costs to these amounted to over £400 which was putting a considerable strain on their finances. Paying only a little more than the minimum payment to the credit cards meant that much of the payment was being absorbed in interest costs and very little being paid to reduce the balance. In effect – they were treading water with no end in sight. Releasing £40,000 from their home at a very competitively priced fixed rate of interest for life, has allowed them to clear off all of their debts, cover the set up costs of the Equity Release mortgage and leave them with an emergency fund/nest egg in the bank for financial security going forward. All of this and they were also over £400 per month better off! To say they were overjoyed would be an understatement!
They were not sure that they wanted to commit to making payments toward the Equity Release mortgage, but liked the fact that there was a built in option allowing them to pay up to 10% of the original amount they borrowed to reduce the balance in any one year!
These fantastic products are proving to be a lifeline for many and well worth considering. To find out more, carefully choose an adviser. A Fantastic directory for doing so is The Equity Release Council website.
Trusting and feeling comfortable with your adviser is vital. You want to make sure that your personal and financial matters are in good hands, and a good way to measure this is by finding our what other clients thoughts are. At the beginning of the year, I found out about a website called Vouched For. It runs along the same lines as TripAdvisor but is for Financial Advisers, Solicitors and Accountants. Clients can share their thoughts on various aspects of the service they received so that others may benefit from their experience. I am very proud of my 5 star rating with Vouched For. To find out what others had to say, please feel free to check out my reviews on the Vouched For website.