The question you need to ask yourself is this: am I struggling to find extra cash? Another good question is: how old am I?
If you’re older than 55 and struggling to find the cash you need, then equity release is a good option for you. You might also be considering equity release as a means to a more comfortable or luxurious retirement. However, as with anything in life, it’s always good to view the full scope of things before making rash decisions.
Adverts may be selling equity release as the next best thing, however, it’s not for everybody. Let’s run through everything you need to know about equity release, including how it works to help you decide whether it’s for you or not.
If you are wondering whether or not, equity release is the right move learn more here: Is Equity Release a good idea?
Let’s Break It Down Slowly
As we’ve said before, it’s a secure way to release money that you’ll pay when you pass away or move into residential care. Its process is also straightforward and easy to understand. That said, here’s a comprehensive guide on the equity release application process.
What you can expect:
Typically, the equity release process can take between 4 and 6 weeks. However, there have been cases completed in just 18 days. This affords you peace of mind and the ability to use your equity release funds sooner.
Want to know more details? There are two kinds of equity release options for you to choose from.
How Does The Application Process Work?
Naturally, you’ll want to allow your application to be an easy and smooth process as that will also provide a level of security to you. You must understand that it is a streamlined smooth process however it has core factors that you need to read up on.
Being aware of these core factors is essential. Your equity release adviser, alongside a case management team, expertly coordinates all the parties involved to ensure your equity release process runs as fast and seamlessly as possible. At various stages of the process you may find yourself having to pay associated costs.
It’s also important to know how long does the equity release application process take!
Hold On, This is Starting to Sound A Tad Expensive…
At this point, you might be wondering about all the costs involved in equity release. Well, the good news is that, they’re at an all-time low, below 3%. Some providers even offer rates as low as 2.25%! That’s incredible!
Let me tell you something:
You’ll end up paying more if you don’t pay off your loan, of course, or if you’re choosing to compound interest monthly. Wondering what equity release costs you’ll have to pay? If you’ve ever taken out a mortgage on your home, it’ll be similar to those costs.
However, there may be a few extra fees you’ll need to pay. You’ll be paying for advice and application services, which are both mandatory. The initial costs you need to pay to access your equity release is dependent on your provider and the product/plan you choose.
For a full comprehensive breakdown: Equity Release Costs
What Are The Pro’s & Cons?
It has become safer and safer over the years, thanks to the ERC and the FCA2 and the protocols they put in place to protect you.
You get instant cash when you need it at all-time low interest rates. You might also have had an increase in your home value that will give you more money to retire or cover all your long-term medical care costs.
The main downside is that you won’t be able to get your property’s full market value. Another pitfall is that you’ll have a decreased estate for your heirs to inherit.
The risks of a lifetime mortgage include owing more than you borrowed due to the compound interest applied. You can, however, choose to end your plan earlier. This will cost you early repayment charges.
The risks of home reversion include only receiving 60% of your home’s market value. Some people only receive 30% back. Another risk is that your equity release provider won’t allow you to move house once you’ve taken out a plan on your current property. To avoid such difficult situations, make sure you enquire with your provider before making a decision.
6 Savvy Equity Release Tips
- Don’t loan the full amount at once, borrow in stages. It’s more cost-effective.
- Choose a company that’s a member of the ERC, i.e. an accredited company.
- Ask for professional advice, preferably from an independent financial adviser.
- Look out for the effects it will have on your benefits. You might lose some with equity release.
- Look at alternative options that would help you with some extra cash other than equity release.
- Keep your family in mind. Go with an equity plan that’s best for you and your heirs.
How Protected Am I?
We understand that all of this sounds potentially risky and at the forefront of your mind is the protection people have with regards to equity release. These are genuine and considerable concerns, as it is a flexibile and competitive industry that is growing.
Fortunately there is secure protection for those who embark upon an equity release product/plan as there is the equity release council that was established for this very reason. The council works purely for the benefit and assistance of equity release consumers.
For more on this: Equity Release Council
How To Find Expert Advice?
Look for experts or professionals who are unbiased, independent, and experienced in the field of equity release. Advisers who are under the rules and regulations of the FCA are always the best choice. The FCA provides extra protection for you and your finances.
What's The Catch With Equity Release?
You’ll have to repay what you borrowed when you pass away or need permanent medical care.
Do I Have To Pay Back Equity Release?
Yes, you do need to repay your loan, plus any interest you’ve compounded. Usually, at the end of your mortgage, it’s also a good idea to make monthly repayments.
How Long Does The Equity Release Process Take?
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Can I Be Refused Equity Release?
The simple answer is yes. You can be refused to release equity from your property or house by a company or a provider. Even though providers have different criteria, most of them will agree on this.
There are a few reasons that this could happen to you, most of which has to do with the property or residence itself, and not the owner. Let’s take a look:
- A flat roof
- Proximity to a commercial property
- Non-standard construction
- Flood risk
- Single skin construction
- Ex-local authority
- Clutter inside the house
- Proximity to electricity
- Spray foam under the roof
Equity release is better than it used to be both in terms of regulations and costs. After reading about what equity release is, how it works, and how much it costs, you should have a better idea if it’s the right thing for you or not. However safe it may be to take out a plan; it might not necessarily be in your best interest.
You shouldn’t have to make a decision on something that doesn’t financially serve you at the time or something you don’t fully understand. Make sure you do your research and feel free to ask us any further questions.