Equity release – friend or foe?
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Equity release has come a long way since Government regulation in 2007, sometimes referred to as lifetime mortgages.
They are designed for people aged 55 and over, retaining ownership of your property while giving you the financial freedom to pursue lifelong aspirations, clear debt, top up income or help with family matters.
However, there remains a lot of misconceptions, typically:
I NO LONGER OWN MY OWN HOME?
Contrary to popular belief you do not lose ownership of your home.
The property remains yours and the mortgage, plus accrued interest, gets repaid on sale, second death or long-term care is needed.
There is a difference between equity release and home reversions.
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I MIGHT OWE MORE THAN THE PROPERTY IS WORTH?
Untrue! No negative equity guarantees ensure that your estate will never owe more than the value of your property when sold.
If property ceases to be your primary residence and is sold, the sale proceeds pay off the lifetime mortgage and accrued interest.
At that point the remaining value will be paid to you or nominated beneficiaries.
If the property sells for less than the amount of the loan, any deficit is written off.
I CAN’T RELEASE EQUITY WITH A MORTGAGE IN PLACE?
You can still release equity from your home with an existing mortgage.
You can pay off the outstanding mortgage balance with the equity you release, or other savings you may have.
In fact, with thousands of interest-only mortgages still in place, this has become one of the most frequent uses!
I STILL HAVE TO MAKE MONTHLY REPAYMENTS?
With equity release you do not need to make monthly repayments. Obviously interest is charged and any interest you choose not to pay is added to the total and paid upon the property sale.
Schemes do exist now though where you can pay the interest!
Molyneux Associates still get concerns over what people have read in the past, particularly pre-regulation products, but with more user-friendly products and interest fixed for life from around 2.3 per cent, why not give Molyneux Associates a call to discuss how this might be useful for you?