Are you an equity release customer?
Equity release rates fall making it worth a look
Who is a typical equity release customer?
While interest in the equity release sector continues to grow, there are many factors that consumers should consider before taking out a plan.
If you’re looking to take cash from the value of your home then equity release could be an option, but there are drawbacks which need to be considered. Customers must be over a certain age, be willing to take out a plan for life and fully understand the impact equity release will have on their finances.
Telegraph Money rounded up some of the key characteristics of an equity release customer:
Equity providers have a minimum age for customers. Usually this is 55 and over, but in some circumstances this could be higher. If you’re younger than 55 then it’s highly unlikely that equity release would be appropriate, given the long-term nature of the agreement.
Have a good understanding of your health
Think about whether you are in good health before taking out a plan. If you are relatively young and healthy then it may not be cost effective to release equity now.
Due to the “rolled up” compounded interest, the interest charges grow sharply once you have taken out the plan. The longer you hold the mortgage, the more of the value of your home that will be whittled away.
Are willing to think long term
Equity release is a lifetime commitment and your plan will only end when you die or move into long term care. This means it is important to understand the overall costs, and what restrictions you will face after signing up.
While some providers will let you move home and “port” your loan to another property, that is not always the case. There may also be costs involved if you wish to move home, or redeem the mortgage entirely. You may also face restrictions on what works can be carried out to the property, such as extensions.
Have discussed with your family
While there is no legal obligation to do so, your equity release adviser should make ensure you have talked your decision through with your friends and family.
Taking out an equity release plan has major implications for family members who may be relying on inheritance in the future, as it will reduce the value of your estate.
Are not reliant on state benefits
Releasing equity from your home could impact your entitlement to state benefits. This is because this extra cash will affect means-tested benefits such as pensions credit and council tax support.
Taking cash from your home could reduce the level of welfare payments you receive in retirement.
Source: Adam Williams, © Telegraph Media Group Limited 2018