Equity Release Companies to Avoid
Contents
Beware Which Provider to Choose
What's Equity Release?
First, let's understand what equity release is. Equity release refers to the financial activity that helps you access the money held in your property. However, you can only become eligible after you're 55 years or older.
You can also get the capital value held in your property's value as a lump sum of an income regarding your house's total value. However, you are subject to repay the money you accessed at a later stage in the future.
What Should You Know About the Equity Release Schemes?
You need to know as much as you can concerning equity release. Below, this article will outline the two choices of equity release that you will encounter:
A Lifetime Mortgage
This form of equity release enables you to release a mortgage on your home, considering that it's your primary residence.
However, you maintain ownership.
You even have the option to ring-fence a part of your property's value for your family to receive as an inheritance. You may also make some repayments or let the interest accumulate. Better yet, if there's any remaining amount on loan or accrued interest, it'll get paid back after you die or move into long-term health care.
A Home Reversion Plan
The second type of equity release, which involves selling part of your home or the entire property. You may sell it to a home reversion scheme provider and receive a lump sum for it, or they can give you in regular payments.
The choice is yours. However, you must be at least 60 years old to get considered eligible for this.
The exciting part is:
You can live and occupy the property without paying rent until you pass away. The only condition is that you must maintain the property orderly.
You also reserve the right to ring-fence a part of the property's value and save it for your family's inheritance in the future.
The Drawbacks and Benefits Involved
The Benefits:
You get instant access to cash whenever you need it. But you can remain an occupant of your property. All the cash you access will remain tax-free. There is no requirement for you to make any monthly payments to repay your loan if you don't want to.
Interest rates will also be minimal.
The Drawbacks:
The drawback that holds the most significance and you must note is that you'll not receive your property's total market value as an equity release takeout. When you compared equity release to selling your home on the open market, you find you get far less money. One other disadvantage is that your beneficiaries will receive less money as an inheritance after passing.
You may end up owing way more money than you had borrowed. Your family may have more struggles to deal with the equity release brokers when you pass away.
Is Equity Release Secure?
Perhaps you're wondering whether equity releases the right option; you need to be content and sure that it's secure for you. All equity release services are safe, and they're regulated.
Back then, equity release products weren't as secure as they are today. Their security has improved because they require the providers to get permission from the FCA under their strict codes of conduct and rules.
Is the 'No Negative Equity Guarantee' Necessary In an Equity Release Company?
The no negative equity guarantee protects you so that you don't end up paying more than you owe the equity release provider. However, when your lifetime mortgage plan ends, the lender will sell your house and settle the loan amount plus any interest.
It is essential.
When does your plan end? After you pass away, or you go under permanent care.
Any remaining proceeds will go to your heirs. However, suppose the estate's market value goes down, and the money can't repay your mortgage. In that case, the lender won't request any more money cash from your estate or beneficiaries.
Your estate will remain protected by the 'no negative equity guarantee,' making it illegal for them to do so. Therefore, consider an equity release firm that will offer you this sort of protection.
Does The ERC Protect Me From Rotten Providers?
Yes! That is the Equity Release Council; to protect you as a client and your finances. That's all they're there to do. They've set up standard rules and regulations that protect you from fishy companies that are only out to get your money.
What are the Interest Rates?
Let's examine the interest rates regarding equity release. It's been at its all-time low. The only condition is that you'll need to pay interest on the money you release. The amount of money you will repay will keep accumulating.
For a lifetime mortgage, the interest rates remain fixed, but they may also be variable. When you have varying interest rates, the loan will have a maximum limit for its lifespan.
Better yet:
It will get repaid to your beneficiaries after you pass away. For a home reversion plan, you'll not get charged with any interest.
Top Equity Release Companies of 2021
According to The Times Money Mentor, LV, More 2 Life, Just, Legal & General, and Aviva are elite companies.
However, it's also beneficial to know which companies to avoid.
The Worst Equity Release Companies in the UK
Avoid these equity release providers:
Avoid any equity release company that doesn't have a 'no negative equity guarantee.'
Any lenders that aren't registered members of the Equity Release Council.
Providers charging top rates of interest.
Providers who charge you very high and early repayments
Equity release firms that will give you large loan amounts before they can analyze your circumstances
Ensure to check the best equity release companies for in-depth reviews of all the options.
Conclusion
Equity release can be just as life-saving as it can also be a downfall, depending on your circumstances. You need to conduct the right research, and you need to be aware of everything.
With the guidelines above, you will make the right choice.