Engelbert Humperdinck couldn't have imagined such a come back in 1967 at the time of his mega hit, but Equity release is expected to become more common 40 plus years on as the UK government seeks to encourage more people to use the assets in their home to help meet the pensions gap and to fund long-term care

Is ER a good idea for you?                                       EH.jpg

There are two types of equity release schemes - lifetime mortgages and home reversion schemes. Lifetime mortgages, which involve taking a loan against a property, are the most common. Home reversion schemes involve selling part or your entire home to the reversion company - at below market value. They may appear less attractive but can provide greater certainty. The companies which provide the schemes get their money back when the house is sold

The high cost of the loans is often what dissuades people from going ahead with equity release.    Interest on lifetime mortgages is normally not payable until the property is sold instead it is rolled up and added to the debt instead.  For example at a rate of  6.5% interest, the loan would double in size after 11 years and triple after 18 years. If the sum released was for example around £45,000 after 18 years at 6.5%, this would have grown to around £140,000

This could of course result in a situation where there is little or no remaining equity in the property to pass on to the your family or for future care costs

In certain situations equity release may be the right solution. For example if  you are currently paying very high rates of interest on credit cards, and you have equity in your property, why not use it to clear those debts? Or if you want to pay for a trip of a lifetime  then who is to say that equity release is wrong

Chris Pond, Chair of the Equity Release Council's Standards Board, comments:
"Equity release could help many people meet their needs in retirement - a better quality of life, meeting the costs of long-term care, giving a helping hand to a younger generation or just clearing debts"

The right advice is crucial

You must think about the long term before embarking on any of these schemes and ensure that you fully understand what you are getting into. For example, what might happen if you want to move into sheltered accommodation or a care home in the future.

Contact Susan Masterton at Blair Cadell susan.masterton@blaircadell.com for sound and cost effective advice before making your decision


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