As the popularity of Equity Release has soared, there are many misconceptions about equity release which hold people back from considering it and changing their lives.
So, let’s debunk some myths about Equity Release/Lifetime Mortgages.
Myth 1. There will be nothing left for my loved ones.
Lifetime mortgages have become increasingly flexible in recent years, and there are now plenty of plans available which allow you to protect a portion of your equity for inheritance.
If you don’t want your loved ones to have to wait until you die before receiving financial support from you, you could use equity release to provide them with an early inheritance.
Bear in mind, however, that using a portion of your equity now means there will be less available to you later and may reduce the value of your estate.
Myth 2. I still have a mortgage on my property, so I will not be able to release equity.
Having a mortgage does not mean that you cannot release equity. In fact, using property wealth to clear an existing mortgage is one of the most popular uses of an equity release/lifetime mortgage.
Myth 3. I will not own my property anymore.
Equity release does not mean selling your home to a lender: you are simply borrowing against it, and you still remain ownership.
Unlike a conventional mortgage, a lifetime mortgage has no fixed end date, so the mortgage lasts for as long as you need it.
Myth 4. I will be paying monthly payments for my lifetime mortgage.
There are no monthly payments to make with a lifetime mortgage – unless of course, you choose to make them.
Some plans, however, allow you to make optional, penalty-free repayments of up to 10% per year of the mortgage balance and there is even a plan that will allow you to make payments of up to 40% now.
If you choose not to do this, then the interest on the amount you have borrowed will roll up over time.
This loan and any interest must be paid back when the property is sold, either when you pass away or move into permanent long-term care.
If you have taken out an equity release product as a couple, it will continue for as long as one of you remains in your home.
Myth 5. I will end up owing more than my home is worth.
Provided you take out an equity release plan with a provider approved by the Equity Release Council, your plan will come with a no-negative-equity guarantee, which ensures you will never owe more than the value of your home when it is sold.
In the unlikely event that your home sells for less than the amount of the mortgage, the remaining balance will be written off, this is called the No Negative equity guarantee.
Typically, once the mortgage has been repaid, any remaining funds will be paid to you or the beneficiaries named in your will.
For more information about your equity release options, please contact Chris at Blue House Equity Release today
**Remember that if you are in receipt of means-tested benefits, releasing equity may affect your entitlement. Fortunately, there are a range of plans available to help you manage the impact of a lifetime mortgage. You should seek professional advice on the best option to suit your needs and ask an adviser for a personalised illustration to ensure you understand all the features and risks.