If you are keen to find out about equity release and to determine which of the available schemes best fits your requirements, you will need to settle down to some fairly hefty research. When it comes to taking out a loan – as the recent recession has taught us – you need to make sure that you are well-informed and extra careful. Browse through FSA equity release resource pages, which are now a part of the Financial Conduct Authority.
Why Equity Release
In short, equity release schemes allow you to continue to use one of your major assets – such as your house, for example, while simultaneously receiving payments from a third party which has either bought the property from you or lent you money based on its worth.
Not only do you get to release equity from your home, thus obtaining more cash on hand instead of it being tied to property, you also receive it as a tax free sum. Taking out money or gaining more income typically means you need to pay taxes on that money. It makes it hard to get what you need for expenses if most of it goes to pay taxes, right?
With lifetime mortgages and home reversion plans, which are in discussion here, you get the necessary funds without paying extra for it, at least in taxes.
If you are looking to take out this kind of loan, or to sell your home in order to secure equity release payments, you will absolutely want to make sure that the product that you choose for yourself is tailored to your needs. Browse the FSA equity release resource in order to help you to make a good decision.
What was the FSA is now the Financial Conduct Authority (FCA); it is one website that provides you with resources to make a decision on whether equity release is right for you or not.
You have additional resources online that can be found and utilised to determine if you can receive enough in a cash lump sum through equity release or if you can get more by selling a little of your home without necessary repayments.
Independent websites like equityreleasesupermarket.co.uk present you with details on financial products for your retirement like those in discussion here. Checking more than one resource can be quite helpful in gaining independent information that supports everything you have found during your research.
Paying Back the Loan
While you are researching your potential equity release scheme, it is very important to remember that all loans will need to be paid back at some point, and that, in most cases, compound interest will accrue. Of course, this is not the case if you have sold your home to a third party.
Home reversion is not a loan so you do not have to pay it back. For some, selling the home in part or full is not a comfortable option, which leaves lifetime mortgages as an equity release scheme with repayment needed.
Interest adds up each year based on an Annual Percentage Rate (APR). Finding the best APR will keep the eventual loan repayment down to a minimum, but it can still require the sale of your home to repay the loan plus interest in full at the time of your death.
This is where the decision to sell now or later has to be made. Selling now could save you from interest payments, versus later when you end up selling a family home you were unable to keep in the family.
Cost of the Loan
While the money you receive from the loan is tax free, this does not mean the entire process is free. Obviously you understand the interest discussion, but there is more. It is still a loan. There is a surveyor fee to be paid when a broker appraises your house for true value and thus the amount they can offer in a loan.
There are also closing costs and the like associated with equity release, particularly during the selling phase of property. These are costs you cannot eliminate, should check and also see if they are out of pocket or if they can be tied to your loan or sale.
This kind of loan requires careful research and consideration. While equity release programmes are useful if you are, for example, a senior citizen with no intention of leaving a deceased estate behind you, they do come with risks that need to be navigated. Using the FSA equity release resource can help you narrow down those risks.