31 October 2009

Liberate your Wealth – Equity Release

What we are talking about here is raising some money by using the value in your house. Why might you want to do that? Well, you may want to do some home improvements, or to help your family out, or simply increase your income. All these are possible.

In the right circumstances it seems to me to be a great solution. There really is no point living in poverty in an expensive house which you own but cannot benefit from.

In the past, Equity Release has had a bad name, let’s admit it. But these days it is fully regulated; advice has to be given by advisers with a specialist qualification, and companies who operate in this market are mostly members of the trade organisation – SHIP – who have their own requirements to be followed by members.

It shouldn’t be the first thing to consider – moving into a smaller house may give a better result, and leave your family with more of a legacy, for example. And you have to bear in mind that raising a sum of money may have an impact on state benefits.

There are two basic approaches – with Home Reversion Plans you sell your house but have the right to live there for as long as you want. While Lifetime Mortgages are just that – a loan secured against your house. You do not have to pay interest each month, because it gets rolled up, thereby increasing the loan. It is paid back after you die or move out when the house must be sold. This reduces the value of what you would otherwise pass on to family.

Depending on your age, with a Lifetime Mortgage, for instance, you may be able to borrow between 20% and 50% of the value of your house. If you want an income, you would take it a bit at a time rather than as a lump sum, so that the outstanding loan doesn’t grow so fast.

Reminder: This is not personal advice - you should take your own advice from a qualified financial adviser before making any decisions. Information given is my personal opinion and not that of any organisation I am connected with.

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