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Equity Release Plans

David Griffin of Release My Equity explains the top 5 things you need to know about today’s Equity Release plans…

1. How does a lifetime mortgage work?

It’s a mortgage that is not time sensitive, the loan plus any interest accrued is repayable on either of two scenarios; upon going in to long term care or death. You can choose to pay interest monthly, roll it up and make no payments at all or a flexible arrangement that allows you to pay 10% per annum of the loan amount borrowed. It’s possible to take as little as £10,000 tax-free and leave more funds in reserve for when you need it. Your property remains your own; you have just borrowed against it.

2. Who are the main lenders?

The most well known lenders in this sector are Aviva (formally Norwich Union), Legal & General & Liverpool Victoria. All told there are 10 lenders that have funds predominantly built on large pension funds. Within this niche market each of the lenders offer features that benefit different types of customers from ages 55 – 90. Rates start as low as 3.97%

3. Can I protect my inheritance?

This is a popular question as lots of people have concerns in this area. Yes you can, It works as follows, if you were entitled to borrow £50,000 and you decided only to take £25,000 then 50% of your property would be protected for inheritance purposes. More if you decided to make monthly payments or use the 10% per annum facility which allows you to pay back interest plus capital.

4. What are the safeguards?

The industry is protected by The Equity Release Council (formally Safe Home Income plans) The new plans come with a “no negative equity guarantee” which means you will never owe more than you borrow. The interest rates are fixed for the duration of the plan, you have the right to remain in your property for the rest of your life or until you move in to long-term care and you have the right to move your plan to another property subject to this being acceptable to the product provider.

5. Who do I use?

You should look around for an experienced specialist in this area who advise on these types of plans. Someone local is definitely advisable as you may need help throughout the life of the product as advice can be needed in the future. A lot of people have had a bad experience of being pestered by phone calls off ‘advisers’ trying to transact this type of business over the phone. My belief is that is should only be done face to face, with family involvement if necessary and via a company that is part of The Equity Release Council.

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