For those approaching retirement age, equity release can be an excellent way to improve lifestyle, implement debt consolidation or even financially assist family members. For many the possibility of enjoying a comfortable and relaxed retirement after working for forty years and diligently paying a mortgage, is only possible with equity release. There are a number of benefits associated with equity release, but here are just the key benefits.
Tax Free Lump Sum
All funds received through equity release are received tax free. There are no rules about what the funds should be used for and they can be used for debt consolidation, supplementing your retirement or even giving away to children or grandchildren. Many people use equity release to fund a holiday home, plan out their estate to minimise inheritance tax or simply enjoy the fruits of their labours with all the comforts and luxuries which would make retirement truly enjoyable. Alternatively, there are some equity release schemes which allow for a smaller lump sum to be taken and an additional monthly income to be received. Regardless of how you choose to receive your tax free equity release funds, you can enjoy them completely.
Tailored Finance
Once people reach a certain age, especially when they have retired, it can be very difficult to obtain conventional finance. Equity release schemes are tailored to the over fifty five age group. They allow this age group of home owners to leverage the equity in their homes to finance their retirement. Many retired people may struggle to manage on their fixed income and be relatively cash poor. However, they have usually spent twenty five or thirty years paying off the mortgage on their home. This means that it represents a significant but in order to unlock this potential, they would normally need to sell their home and move to somewhere cheaper. With the tailored plans of equity release, there is no need to move home. All schemes allow for the home owner to have the right of residency in the property until they pass away or it is no longer their primary home. At this point, the property is sold and the balance of the equity release is repaid from the sale proceeds.
Numerous Different Plans
The equity release industry has evolved a great deal in the last few years. There has been an increased demand which has been met by a number of financial institutions offering new products and schemes. This increased competition has now allowed some very attractive deals and packages to become available. Equity release schemes are now available to suit myriad circumstances including:
• Interest only lifetime mortgage: This type of equity release allows for home owners to make a payment each month to cover all or part of the interest on the loan. This allows for the balance of the loan to be relatively stable, therefore protecting the potential inheritance for beneficiaries.
• Roll up lifetime mortgage: This type of plan allows for no monthly payments. This is ideal for those with a limited income looking for additional finance. The interest is accrued and compounded to the mortgage balance. While this may increase the balance significantly, there are rules and regulations which protect the consumer and ensure that no equity release scheme participant leaves a debt to their estate because the equity release loan exceeds the value of the property.
• Draw down lifetime mortgage: This scheme allows for home owners to draw down funds as and when they require them up to their draw down limit. This is perfect for those who don’t require a large initial sum, as they only pay interest on the funds which have already been drawn down.
• Home reversion plans: For those people who are concerned about interest rates and borrowing for their debt consolidation, there is the option of a home reversion plan. This type of arrangement allows the home owner to sell part or all of their home to the home reversion provider. This means that while they sign over ownership of the home, they are allowed to live in the property rent free for the rest of their lifetime.
If you are considering equity release for debt consolidation, retirement supplementation or any other reason, it is important that you assess the advantages and disadvantages of each scheme. An equity release adviser will be able to assist you in finding a great deal to suit your circumstances and needs. They will also help you to explore all the options and ensure that equity release represents the best possible solution to your financial situation.