Equity Release is quickly becoming a the choice for many as a means of generating extra income for their retirement.
Despite this, there is still a negative perception of Equity Release among the press and general public.
The main concerns seem to be that equity release is an expensive and risky option and although it’s not the right solution for everyone, it certainly proves beneficial to those who are facing rising living costs and a shortfall in income in their retirement.
Is equity release expensive?
Equity release is 2.5 to three times cheaper than credit cards or overdrafts (Equity Release Market Report, Autumn 2014).
It’s true that short-term fixed-rate mortgages have lower interest rates (averaging 3.45 per cent in June 2014) compared to equity release plans (6.39 per cent) but the chances of the retired securing a short-term fixed-rate mortgage are slim and furthermore a short-term fixed rate is not comparable on any level to a fixed-for-life interest rate.
With no monthly commitment to repay interest, Equity Release is the only product on the market that doesn’t require regular payments through the lifetime of the loan, freeing up disposable income.
It seems that hidden costs are another misconception surround Equity Release plans. In reality, hidden or unexpected charges do not exist as regulations ensure transparency of costs and charges for all clients. Early payment penalties are presented clearly and on numerous occasions when an individual applies for Equity Release by both the advisor and the clients’ solicitor.
Its also possible for clients to move house whilst within an Equity Release policy without facing early redemption penalties.
What safeguards are in place?
Equity Release is not always right for every individual and where appropriate advisors will ensure their clients are fully aware of the reasons why.
The ‘No Negative Equity’ guarantee means that no matter what happens to the market value of your home, you will never owe more than the value of your home and your beneficiaries would never have to meet the cost of your loan.
Customers have a right to remain in their home for life provided the property remains their main residence.
The Equity Release plan is illustrated in a document which is communicated in plain English and outlines the benefits and limitations of the policy. Costs and tax implications are detailed as well as information in relation to the impact that the housing market can have on their loan and the clients’ position when considering moving home.
An Independent solicitor chosen by the client will carry out all required legal work. The solicitor will be presented with the full details of the benefits and limitations of an Equity Release plan who will then explain to the client to ensure that everything is fully understood.
Customers can move their plan to another suitable property without any financial penalty.
The interest rate will remain fixed for the life of the loan meaning the client can establish how much is owed at any point.
Call us now on 01204 884545 for more information on Equity Release Plans