Equity release top 10 tipsPosted on: 16 July 2012 by Gareth Hargreaves
Ten things to consider before you take out an equity release loan
If you are considering taking out an equity release plan there are many considerations to weigh up. Freeing equity that is tied up in your home has advantages and disadvantages and you must have a full understanding of the implications before you decide if equity release is right for you.
- Consider all the alternatives such as moving to a smaller home. Capital raised this way will invariably cost you less in moving expenses than in Equity Release set up charges and interest.
- Assuming you do not wish to move, before proceeding with Equity Release, consult and discuss your plans with your family. This will avoid any unnecessary family surprises later on and they may be able to suggest alternatives.
- With 27 Equity Release providers in the market it will be difficult for you to find the best deal yourself. Not only that, many of the schemes are only available through authorised intermediaries. So find an independent specialist in Equity Release advice.
- Choose your adviser carefully. Is he able to advise on entitlement to welfare benefits? Is he also conversant with all aspects of Long Term Care funding? Some of this may be relevant to you now or if not, may well be if you ever needed care in the future. The wrong advice could cost you dearly. An adviser specialist in all these areas will be able to explain all the relevant issues and thus help you achieve the best outcome for you.
- Ask your adviser about his fees. Not all advisers will charge you a fee. Make sure you get value for money from whomever you choose.
- If you are already in poorer health it may be possible to get better terms from your lender or reversion company. Make sure your adviser and lender are aware of any health problems you have.
- When comparing interest rates always compare the APR [ annual percentage rate] and not the headline rate. The difference can add up to 0.5% on the rate actually charged. This is due to the costs of setting up the arrangement and how interest itself is charged. This can be daily, monthly or annually. The longer the period the better it is for the borrower. (The exact opposite is true for traditional loans which are repaid by monthly instalments)
- Ask your adviser what ongoing support and advice he will provide for you. Such advice may be essential in the years ahead. This could range from claiming welfare benefits or care and support from the local authority to mitigating Inheritance tax. Advisers who specialise in elderly client advice will be in a better position to help than say a traditional mortgage adviser.
- You will need a solicitor. If you have one make sure to ask him whether he is familiar will the paperwork. Otherwise it could take longer and cost you more in fees. There are now a significant number of solicitors who have undertaken additional training in this specialist area. Your Equity Release adviser should be able to introduce you to such a firm.
- Make sure you have a clear idea on your objectives when embarking on this road. Your priorities and your views as to the future direction of house prices will materially influence whether a lifetime mortgage or home reversion scheme is right for you. Your adviser should be able to help you if not, seek alternative advice. Remember a decision made in haste will be regretted at leisure.
To find out more about equity release options and considerations visit Equity release Council
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