Myth 1 – I will not leave an inheritance to my beneficiaries
Fact – When equity release first arrived in the mid-1960s this was almost certainly the case, the products then were known as home reversion plans where you effectively sold your home to a third party at a reduced price but had a right to live there until you either died or went into permanent long-term care. Clearly these products had a place, but they were not good for everyone especially if you did not live too long after taking out the plan.
The good news is today’s plans are very different, a raft of legislation and product
innovations means that today's “Lifetime Mortgages” bare little comparison to the products of the 1960s. To start with you now retain full ownership of your home with the lender only placing a first charge on the property the same as any residential mortgage lender would do.
Next every lifetime mortgage offers you the facility to make voluntary repayments if you
choose to, usually up to 10% of the loan amount each year to prevent the interest from
growing and potentially even repay some of the capital. Careful loan amounts and interest rates that are fixed for life mean that even if you choose not to make any repayments future house price rises often match or exceed the “compounding interest effect”. As an example, if you borrowed 25% of the value of your home at 5% interest (fixed for life) you would only need your home value to increase by 1.25% each year for the growth is house value to match the loan growth. On average UK house prices have risen by over 4% per year since 2011.
The safest route is of course to only borrow what you need, another great feature of today's plans is a “drawdown facility” where you take an initial lump sum that you need today and have a pre-arranged sum that you can draw from if and when you need it in the future. The beauty of this is that interest only starts to accrue as and when you access the additional funds, if you don’t take it you pay nothing for it!
At Viva Retirement Solutions we carry out a full “fact find” with each of our clients to ensure they borrow the correct amount and as a whole of market advisory service we can source the products that offer all of the features you prefer at the lowest rate of interest from across our lender panel.
If you would like to find out more, please contact us on 0800 046 9776.