Choosing to take an equity release scheme is very much a personal and lifestyle choice. There are many reasons for going ahead, and many for not going ahead, but only you know whether it is going to work for you. You should only go ahead once you have taken professional advice, preferably discussed it with those it effects, and are totally comfortable with the idea.
Although what you want to use the money for is as individual as you are, there are some common traits with all applications. These commonalities include having a property of some value, limited or no savings and a desire to achieve some purpose that is important to you. It is the last of these that tends to drive the desire to press ahead and put you in the position where you achieve what will make you happy.
Some reasons for going ahead…
We often think about what we would like to do if we suddenly had a lump sum of money, it’s amazing just how the reality of acquiring such a sum through Equity Release alters the mindset from the fantasy of exotic holidays and new cars (which are perfectly good reasons for taking a plan if that is what you want!) to the more mundane of putting in new windows, fixing the roof or adding solar panels. In fact, improving the house is one of the biggest reasons for taking a plan, and the definition of “improving” can be quite varied.
Video courtesy of Dennis Perry at The Right Equity Release.
As we get older, our physical needs may change. “Improving” the house can include things such as adding an extension so that you do not need to use the stairs, converting the bathroom to a wetroom in order to make bathing easier, or it may be that the whole house can be modified in order to make it friendly to any disability. If this is the reason, then the first step is to find out the cost of what you want and make that figure the cornerstone of your enquiries into whether an Equity Release plan is viable.
Clearing debts or an interest only mortgage
Once you have retired, it is almost certain that your income has fallen and the amount you have to spend on fixed expenditure rises as a percentage of the income you now have. This fixed expenditure might include mortgage or other debt related costs such as personal loans or credit cards. Raising a lump sum to clear these will free up your monthly income and generally raise your standard of living. It is important though that you look at the figures involved carefully. Taking an Equity Release plan for this purpose involves making a full and honest appraisal of your financial position and a realistic assessment as to whether taking the plan is going to solve your problem. A situation that often arises is where an interest only mortgage is coming to the end of its term and there is no repayment vehicle in place. The lender will expect the loan to be repaid at the stated date otherwise there is the risk of the property having to be sold in order to clear the mortgage. An Equity Release plan is something that should definitely be considered in this situation and more than ever, professional and experienced advice needs to be sought.
Helping the children
It might be that you, as the homeowner, are quite happy with your lot and you do not need a lump sum for your own benefit. Instead, you might like the idea of giving a lump sum to someone in your family so that their lot is improved. Giving a deposit for a house, clearing debts, and helping with university costs have all been common reasons for taking equity release plans and, in the main, a good outcome has resulted. However, if you are using the money to help a family member then you have to realise that this help may result in other members of your family not inheriting as much as they would have otherwise received.
Do something you have always wanted to do!
One of the first Equity Release plans I ever arranged was for a chap in his early seventies, widowed for some years and with no immediate family. He lived well within his means, had no debts and on the face of it was quite comfortable. However, he had held an ambition all his life to go to Las Vegas and, shall we say, experience something he had only seen in films. I remember that we put down the reason for the plan as a straightforward “holiday”. I met him again about a year later by chance in the street. To say he was happy with his decision was an understatement! I’m not suggesting that we all blow our hard earned on trips to Las Vegas, but I do know that many of us have a “once in a lifetime” something that we would like to do or somewhere we would like to go. Taking an Equity Release plan may be the key to achieving that ambition.
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