Equity Release in Weston-super-Mare
Fish4Mortgage is located in Weston-super-Mare, Somerset & is the area’s leading Mortgage Broker with over 25 years of knowledge in the field. We specialise in many areas including re-mortgages, first time buyers, commercial mortgages, general insurance & secured loans. Explore our website to find out more information & also go ahead & use our Mortgage Calculator to see what deals are available to you.
What Can Equity Release Be Used For?
Examples of Equity Release Usage
- Clear the balance of their existing repayment mortgage and having no monthly repayments
- Interest Only “Time-bomb” repaying the mortgage that has no Repayment Plan (Endowment) or a Repayment Plan with a shortfall
- Paying off existing debts and lower monthly outgoings
- Carry out some Home Improvements
- Supplement the pension to cover living expenses or improve their standard of living
- See the family enjoy the Inheritance whilst you are still here
- Reduce Inheritance Tax liability
- Funding a luxury item or experience
- Travel or take a Trip of a Life Time / Celebratory Holiday
- Help the children / Grandchildren onto the property ladder
- Home help or Care costs whilst remaining at home
Equity Release is not for
- Equity release should always be a last resort and is for the long term
- You should spend your savings or capital before you choose Equity Release
- If you need money in the short term only you should not consider Equity Release schemes
- Other sources if you need short term finance are Bank Loan, Family Loan & Credit Card
Interest only time bomb
Equity Release could be a “lifeline” for interest-only mortgage holders who do not have a repayment vehicle in place or the maturing policies have a shortfall. You may have thought that you would downsize, now you’ve come to the point that you feel you don’t want to downsize or can’t downsize. Equity Release can be a lifeline, because it will enable you to stay in your home, pay off the existing mortgage and not make monthly repayments if you can’t afford to.
The Drawdown Lifetime Mortgage
A Lifetime Mortgage where you can take staged cash payments. The most popular form of equity release scheme on the market today. Using the same principle as with all Equity Release schemes, which is to take an initial lump sum, the difference between the Drawdown & the Standard Lifetime Mortgage plan is that with Drawdown you don’t take all the funds at once.
You can carefully manage the withdrawal of funds as & when you require them and can therefore tie them in with certain lifetime events or requirements such as extra income, lifestyle purchases, gifting, holidays etc. A good way to do this is to create a Budget Planner.
A Cash reserve is created for you at the inception of the plan by the lender who determine the maximum amount you can borrow based on the age of the youngest applicant and the current market valuation of your property. These create a loan-to-value percentage which is then used to calculate the total cash reserve facility that has been created for you. You then decide how much you want initially. The remainder is held by the Equity Release provider until you decide to take further tax free cash in the future. Interest is only charged on the Initial withdrawn amount and not the cash left in the reserve facility.
The plan is taken on a roll–up lifetime basis where there are NO monthly payments and the interest compounds either annually or monthly for the rest of your life. Depending on initial lump sum, any future withdrawals made & the interest rate charged on each tranche, will determine the eventual balance. This will be whenever the last person dies or gone into long term care. At that point the property is usually sold, with the proceeds being used to clear the Equity Release mortgage. Any remaining balance passes into the deceased persons’ estate. There is no compulsion to take anymore withdrawals in the future if none are required.
To know what cash is available to withdraw, your current balance with interest accrued to date and the year-end balance, the lender will provide you with an Annual Equity Release statement. Bear in mind that any future withdrawals taken from cash reserves will be at the interest rate applicable at that time, not necessarily at the rate the plan was started, so always check beforehand.
The Cash Drawdown Reserve facility is available in the future subject to each lenders terms and conditions. The Equity Release lender selected will have a bearing on the future cash facility. Some guarantee a term and this guarantee may provide a safer option. Others who offer an indefinite reserve facility that can be withdrawn under severe market conditions, such as the lender withdrawing for the Equity Release market, may not be so attractive.
Reinvesting Released Funds
You should not use Equity Release for the funds to simply sit in a Bank Account. Earn low amounts of interest if you leave your money in a Bank Account yet pay higher levels of interest on your debt in the Equity Release scheme.
Pros and Cons Of Equity Release
Pros Of Equity Release
You can live in your home without having to pay mortgage payments as the lender requires no monthly payments towards the interest charged. You continue to live in your home and still retain 100% legal ownership. It can provide a tax free lump sum to support you through retirement. No Negative Equity Guarantee means you never end up owing more than the value of your property. Equity Release allows you to unlock the equity in your home without having to sell up and move out of your house so that you can have the money to spend on whatever you want or need. Equity Release may involve a Lifetime Mortgage or a Home Reversion plan you have the choice. You choose the solicitor you want to act for you.
If you move to a new property to be occupied as your main home, you will be free to transfer your Lifetime Mortgage to a new home of your choice, so long as it provides adequate security for the Lifetime Mortgage. If the loan and the interest you owe is more than the amount you are eligible to borrow on the value of the new home, a mandatory repayment may be required to repay part of your existing loan from the sale proceeds.
No early repayment charge is made in the event that you transfer your Lifetime Mortgage to the new property which will be occupied as your main residence. You will be responsible for any costs related to the transfer, including the solicitor’s fees for work which they will need to carry out (even if the move falls through). You have the right to move to a “suitable alternative property” however some Retirement Complexes are not acceptable it depends on their open market sale-ability.
Cons Of Equity Release
Equity Release should always be a last resort. You should spend your savings or capital before you choose Equity Release. Equity release is for the long term. If you need money in the short term only you should not consider Equity Release schemes. If you need short term finance consider a Bank Loan, Family Loan and Credit Card. You should not use Equity Release for the funds to simply sit in a bank account. Why earn low amounts of interest if you leave your money in a bank account yet pay higher levels of interest on your debt in the equity release scheme?
A release of equity effectively takes cash out of your property lowering its net asset value. This reduces any inheritance you intend passing onto your beneficiaries. If the proceeds from a UK Equity Release are used to increase savings, then means tested benefits such as Pension Credit & Council Tax Benefit could be reduced. Equity Release schemes are designed to run for the rest of your life. Should early repayment arise, then substantial penalties could be charged by the lender. A combination of the Valuation fee, Application fee, Solicitors’ fee & Advice fee can all reduce the final amount you receive. A firm offering Whole of Market research will recommend to you the best equity release deals. Upon completing a Lifetime Mortgage or Home Reversion, you have secured a loan on your property. This may restrict your options to raise additional finance moving forward.
Home Reversion at 100% means you no longer own your home whilst living in it for life rent free. Other Occupants living in the property who are not a party to the Lifetime Mortgage have to move out when the property is sold on last survivor death or moving to Long Term Care.
Is Equity Release Right For Me?
Equity Release is not for everyone
An Equity Release plan may not be suitable for all retires, because your financial situations may render them not suitable so in these cases you would need to find an alternative way of an influx of cash. Consider both for the current point in time and how any of these alternatives may be relevant in the future.
Reduce your expenditure
With an increase in Equity Release lending being for debt consolidation purposes, many people have found the income transition from employment to retirement is a struggle. To maintain living standards in retirement, compared to employment is difficult for many & some never come to terms with this loss of income. By not cutting the cloth accordingly, debts amass on credit cards & loans & the downward spiral begins. By planning ahead before retirement & then analysing where cutbacks could occur once retirement starts, can have a significant influence on future retirement finances.
Consider other types of loans – credit cards, personal loans, mortgages
Depending on affordability & the duration of the lump sum required, there are shorter term loan options available than Equity Release. A personal loan or strict use of a credit card and using some of the 0% credit offers available could prove to be extremely costs effective. The lifetime nature of Equity Release schemes means that if they are paid off early, there could be considerable early repayment charges levied by the provider. Beware of high APR’s on loans and credit cards & bear in mind potential rate changes that could occur in the future should interest rates rise again.
If in debt there is the moneyadviceservice.org.uk
Look to see if you are ready to adapt and live in a different property or moving to a cheaper part of the country both of which comes with considerable fees and costs.
Rent a Room
If you don’t want to move home or away from your friends and social environment you could rent a room but this would involve having another person living in your house with you. Taking in a lodger could help bring in extra income. The Government ‘rent a room’ scheme from April 2016 allows home owners to let out a furnished room and receive up to £7,500pa in gross receipts without liability to income tax. With a room to spare it could create a good tax free income. Remember to check with your home insurance company & any lease that may exist on the property to ensure it does not create any exemptions.
Consider the benefits that you may be entitled to. Working Tax Credit, Child Tax Credit, Guaranteed Pension Credit, Savings Pension Credit, Housing Benefit, Council tax Support/Rate Relief, Child Benefit, Income Support, Jobseekers Allowance, Employment & Support Allowance, Universal Credit.
Savings & Pension Income
If you have savings or investments or other assets could these be used first.
Financial Assistance from a Family Member
It is important to seriously consider involving your family in this decision. Particularly if they are expecting an inheritance. They may still get a lump sum but depending on the plan chosen this may be considerably less than by not proceeding. Factors like how long you live and whether you make any repayments will affect the total repayable and hence the amount left to pass on.