Stay Away From These Equity Release Providers
First, know everything about an equity release company
before signing a contract with them and taking out a plan. Otherwise, you may be
in trouble later in your life.
This article will tell you the good and the bad of companies
you should know.
What's Equity Release?
Simply:
Equity release is the value tied up in the property that
lets you access your money. However, you only become eligible once you’re 55
years or older. Then you can access the capital value of your house as income.
Of course, you’ll need to pay that money back at a later
stage.
Better yet:
It’s such a great way to get quick cash access when you need
it, with little interest to pay. (It’s at an all-time low of 2.25%.)
What Should You Know About The Types Of Equity Release?
Below, we outline the two types of equity release available:
A Lifetime Mortgage
This form of equity release lets you take out a mortgage on
your home if it’s your primary residence. And you will remain the owner. You
also have the option to ring-fence part of your property’s value as an
inheritance for your family.
You can either make repayments or let the interest increase.
Any outstanding loan amount or interest will get repaid after you pass away or
need long-term medical care.
A Home Reversion
With this form of equity release, you sell some of your
property or your entire property. You can sell it to a home reversion provider
and receive a lump sum for it. They can also pay you in regular income. You
have a choice.
However, be at least 60 years old to become eligible.
Now, listen to this:
You can occupy the property without paying rent until you
pass away. The only condition is that you need to maintain the property in a moral
order. There’s also the option to ring-fence a section of the property as a
future inheritance.
The Benefits & Drawbacks of Equity Release Schemes
The Benefits
If your retirement income is not enough to sustain you, then
releasing your property’s equity can be a significant saving!
You have instant access to cash when you need it, and you
can still occupy your current property.
The cash you receive will be tax-free.
You won’t need to pay monthly instalments if you don’t wish
to.
Interest rates will also be little.
The Drawbacks
One major drawback that you don’t take your home’s full
market value out. In contrast to selling your home on the open market, you get
less money with the equity release route.
One other drawback is that your heirs will get less money
when you die.
You may also end up owing much more than you had borrowed.
How Safe Is Equity Release?
Perhaps you’re contemplating whether equity release is the route
to take, and you need assurance that it’s safe.
Equity release products remain regulated to ensure your
safety.
So, understand this:
Historically, equity release products weren’t as secure as
they are today. Now there is a committee that holds the responsibility to safeguard your equity release.
The committee known as the Equity Release Council (ERC)
makes sure that there is a no negativity equity guarantee when you release your
equity. It requires providers to get permission from the FCA under strict rules
and codes of conduct.
Now, let’s look at some equity release companies.
The Best & Worst Equity Release Companies of 2021
Best in the UK:
Household names in the UK are More 2 Life, LV, Just, Legal
& General, and Aviva.
Top 5 Lifetime Mortgage Providers
It’s vital for your future finances that you should know
everything about all the viable companies. If you go with one company we
suggest, you won’t have future problems. So, our top 5 should always be right
for you:
Aviva
In the UK, Aviva is a household name. They’re known mainly
for their pension plans and insurance products. To add to that, they’re one of
the oldest providers. Aviva has a lot to offer, and they’ll be an excellent choice,
as over 200 000 people would agree.
Since 1998, Aviva has helped people release £7 billion.
Hodge Lifetime
In 1965, Hodge Lifetime created its first equity release
plan, making them the longest established provider in the UK.
Julian Hodge Bank Limited is the product provider.
As one of the oldest providers, they’ve built up an
excellent equity release market. They’ve created a superb retirement mortgage
range to coincide with the traditional lifetime mortgage plans.
Just Retirement
Extremely popular in the post-retirement marketplace, they
are excellent in giving retirement income as annuities. They’ve also started
lending cash through equity release plans or schemes.
Let me tell you:
Just Retirement also has its equity release model, which has
proved one of its strengths. Not only do they lend money, but they also fund
other company’s equity release plans. Their equity release plans include a wide
range of traditional lifetime mortgages, drawdown lifetime mortgages,
interest-only lifetime mortgages, lump-sum equity plans, and enhanced equity
release plans.
LV
LV, or Liverpool Victoria, is a “mutual society” and got established
in 1843. They work primarily for working-class people. They offer a range of
equity release plans such as drawdown lifetime mortgages and lump-sum schemes.
You can get equity release on your primary residence, your
secondary residence, and your holiday home.
Legal & General
They’re also a household name that joined the lifetime
mortgage field in 2015. They have two options for lifetime mortgage: L&G
Income Lifetime Mortgage and L&G Flexible Lifetime Mortgages.
Let’s look.
• L&G Flexible Lifetime Mortgages
You get colour-coded to show the amount of money you can
borrow according to your property’s value (LTV). For example, “Flexible Pink.” The
amount of interest you’ll pay will depend on the LTV. The “Flexible” mortgage
range allows voluntary repayments, which give you up to 10% of what you
borrowed annually, but you won’t get penalized.
• L&G Income Lifetime Mortgage
The same rule applies where you’ll pay more interest when the LTV is high. These plans give you a fixed monthly salary for 10-25 years. This income can start from £200 upward.
Beware Of These Pitfall Providers
It’s good to know which companies to avoid.
Any equity release provided that doesn’t have a ‘no negative
equity guarantee.’
A provider that isn’t a member of the ERC.
Any lender that charges high-interest rates.
Conclusion
Equity release may be life-saving, but it can also lead to
your downfall, depending on your situation. You must conduct the right research,
and you must remain aware of everything. Be sure to choose a provider that’s
going to help you as you need.
With the guidelines above, you will make your choice
correctly.
Make sure you also check the best equity release companies
for in-depth reviews of all the options.
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