Enable’s experienced IFAs in Bishop’s Stortford are being asked more and more about equity release as part of financial planning. Until recently it was mostly dismissed as a last resort for those without sufficient pensions, it is growing in popularity but beware it won’t work for everyone.
Data from equity release company Key found the average customer released over £77,000 worth of equity from their home at the end of last year. This is probably in part due to the fact that interest rates on equity release products have been falling since 2014. Moneyfacts spokesperson Rachel Springall say, however, “the whole package of an equity release deal must be weighed up, especially any fees included. As 66% of the market charges a product fee, borrowers need to be wary of the upfront cost of any deal.”
There are reasons why equity release is becoming a more mainstream option. The main one is that many are finding themselves without a sufficient pension pot. Historically, equity release has predominantly been viewed as an alternative to a regular pension. But it should never be entered into lightly or without advice.
The most popular type of equity release is a lifetime mortgage. Essentially, you take out a loan against some of the equity you have built up in your property, and therefore are able to ‘release it’. You don’t make any repayments of this mortgage either. Instead, you are charged interest on the loan every month, and when you die or move into care, the debt is paid off using the proceeds from the house.
Most lenders also offer no-negative equity guarantees. This means that the outstanding debt will never be larger than the proceeds from the house. Enable’s IFAs in Bishop’s Stortford can talk you through all your pension options. Primarily we like to help you work towards putting enough aside for retirement in the first place.