Equity release advice
Increasing numbers of homeowners are finding the old cliché of becoming ‘asset rich and cash poor’ when they reach retirement to be true, as the value of their homes far exceeds their pension savings.
While this may be less of an issue when you’re working and still have time to contribute to your pension pot, it can have much greater significance in retirement, or if you are looking to scale back your working hours in preparation for retirement.
The point at which we start to consider whether (or not) our pension savings will cover our financial needs in retirement is often the time that we look at the alternative ways to supplement our pensions.
For many, downsizing and moving to a smaller home could be an option, but for others who do not want to move, an equity release scheme could be the alternative move.
The question to ask is: where do you find the best equity release advice?
This is where we come in. At Equity Release Supermarket, we have an experienced and specialist team of advisers who will help you to explore the whole market and weigh up the best options for your circumstances. If we don’t think equity release is right for you, we will say so. Our job is to be impartial and give you all the information you need, whether you choose to pursue equity release, or not.
Let’s explore some of the main reasons why equity release advice is so important.
To help you decide the right age to take out equity release
Equity release is available to homeowners from their 55th birthday. However, at that age, the amount that you can borrow is significantly lower than for older homeowners, as lenders apply a sliding scale, whereby the older you are the more you could borrow.
Starting an equity release scheme early in life is therefore carefully managed by lenders, who will limit your borrowing accordingly. For this reason, if a release of equity can be delayed somewhat, we would always advocate this decision, as rolling up interest from age 55 can amount to a significant compounding of interest.
Today's lifetime mortgage plans come with many flexible features to help mitigate the roll-up of interest if necessary. Flexible voluntary payment features can now minimise the effects of compound interest.
However, many borrowers choose not to make monthly interest repayments on their equity release plan, with the amount borrowed and ‘rolled up’ interest being repaid when the plan ends - when the final borrower dies or moves into permanent care.
The impact of the decision not to make payments is that interest to be repaid will increase significantly over time. For example, an equity release plan with a 5% interest rate will result in the overall debt doubling every 14-15 years.
As the age at which you take out an equity release plan has such a significant impact on both the amount borrowed and typically the final amount to be repaid, it will be a very personal decision. A specialist Equity Release Supermarket adviser will gladly guide you through this process and tailor a plan to your circumstances.
To help you find the right plan
In the world of traditional mortgages, the deal with the lowest interest rate is usually the best, simply because it means your monthly mortgage repayments will be lower.
However, in the world of equity release, that logic doesn’t often apply because typically no monthly interest repayments are made, plus there are many features and options available from which to choose from.
So which plan is going to be right for you? The answer is again very much dependent upon your personal circumstances both now and in the future.
If you have children, you may want a plan that guarantees an inheritance for them. If you want to repay your plan in full at some point in the future, you may want one with early repayment charges that reduce over time. If you have any health conditions, enhanced plans could allow you to borrow more.
With so many plans and options available, it’s vital that you talk through your financial goals and objectives for the future with your local Equity Release Supermarket adviser. In turn, they can search the whole of the marketplace and find the right deal for you.
To help you claim and/or keep any means-tested benefits
If you claim any means-tested benefits – such as Pension Credit or Council Tax Support, your eligibility may be affected if you take out an equity release plan.
However, benefit entitlement is not always that straight-forward and the answer will entirely depend on your circumstances and the type of equity release scheme that you choose.
Your local Equity Release Supermarket adviser can help you on two fronts. Firstly, they will be able the provide you with an indicative benefits analysis to help you claim any entitlement, and secondly to ensure that any entitlement you receive is unaffected when you take out an equity release plan.