Thousand Of Over-55's Use Equity Release In 2014
It would appear that equity release has finally hit the mainstream across Britain as more pensioners and older people look to release equity from their homes without having the usual monthly mortgage payments that are associated with a loan secured against your home. It is a very useful way for homeowners to raise much needed cash to pay for day to day living and pay down debts.
Many pensioners have hundreds of thousands of pounds of equity in their homes but do not have very much cash in the bank to pay for day to day life. Unless you have a good pension behind you it is probably fair to say that you are likely to have a problem funding your lifestyle when you retire.
Because of the considerable rise in house prices over the years many houses are worth a small fortune but of course not everybody wants to move home particularly if you have lived there and raised your family there. Depending on your age you will be able to raise a loan against your home without any monthly payments.
There are lots of different schemes available but for the purposes of this article lets say you receive a lump sum which will only be repaid when you die or move out of the home. When the loan is taken out the ownership of the house will be transferred to the mortgage and you will live in the house as a life tenant.
Using Equity Release To Pay Off Your Debts
Even as you approach retirement many debt can be major issue whether it is a mortgage, personal loan or credit card debt. As with most debts that are nearly always paid off by borrowing money from another source. According to a some sources the average monthly credit card payment for the average customer aged between 66 and 74 is as much as £585 a month. After the age of 76 the average figure is reduced to £225 per month but interestingly this is only because the customer can't afford the figure of £585 per month. This can be a very stressful time for customers who can sometimes enter a spiral of out of control debt which is only repaid upon the death of the customer or by finding a lump sum from somewhere.
No Monthly Mortgage Payments To Customers
With an equity release scheme thee are no monthly repayments. Instead the interest is rolled up and repaid when the customer dies. Because there are no monthly payments this type of borrowing will be expensive in the long run and if you take out the full amount of equity available under the scheme there is unlikely to be nothing left for your family members to inherit.
Of course there are are many different types of schemes available and this market is now regulated by the Financial Conduct Authority. Because it is regulated by the FCA it is attracting some of the biggest players in the pensions industry such as Aviva and Legal and General to name just two.
Ensure You Have A No Negative Equity Policy
The advice to anybody thinking about taking out this type of product is to sit down with your family and look at schemes from as many providers as possible. You should look out for the companies that offer the no-negative equity guarantee. This means that you will not have to worry if the value of your home drops. It seems insane to be considering that house prices could fall but nobody really knows what will happen in the future and you do not want to be on the hook if your loan ends up being worth more than your home.