MIS-SOLD EQUITY RELEASE. ARE THERE OTHER OPTIONS TO EQUITY RELEASE?
Equity release allows you to access a cash lump sum by taking out a loan that is secured against your home. For some it can be a useful way of accessing funds to help out family, pay off an existing mortgage, repay existing debts such as credit cards, or boost your retirement income.
It’s certainly not something to be taken lightly however, and it won’t be suitable for everyone. There are significant costs involved and releasing money from your main home comes with a number of risks. You can read more information about equity release and how it works from many articles on the internet, but here are some brief alternatives you may want to look into.
If you’re looking for somewhere to start, you can get expert advice from an Equity Release specialist. They are active members of the ERC and can advise on equity release mortgages from the whole of the market. They’ll listen to your needs and talk you through your options, so you can decide if equity release is the right option for you.
Taking out an equity release product is a big financial decision and if you need to raise extra funds, it isn’t your only option. Before committing to any particular course of action, it can be extremely helpful to consider if there are any other potential alternatives to equity release that might help you achieve what you need.
Consider downsizing or moving to a cheaper property
Depending on your health, financial commitments and overall circumstances it might be worth considering downsizing or moving to a cheaper area if you need to raise a large amount of cash.
It’s worth pointing out that this can still come with significant moving costs such as estate agents fees, removal costs and stamp duty charges. The upside however, is that you will know exactly where you stand and hopefully will be able to clear all your debts. Depending on how much cheaper the property you move to is, you may even have a cash surplus to help live off.
The reality of downsizing is that financial considerations will only be one part of the decision. Many people choose to move to a cheaper property for health or lifestyle reasons a smaller house to maintain, fewer stairs, a bigger garden in a cheaper more rural location etc. It’s also important to think about the downsides of moving, not only are there costs involved but if you move away from friends and a strong sense of community – it can have a significant negative impact on your quality of life. Learn more about downsizing and whether it could be the right option for you.
If you’re still paying off an existing mortgage, you may be able to extend the term or even borrow more depending on your circumstances. Age alone is rarely an issue for people when they come to remortgage these days more often than not, it is the income affordability assessments that the mortgage provider has to do that restrict the availability of mortgages on offer and the amount you can borrow. These are typically stress-tested under scenarios where interest rates rise significantly. They must also factor in any fall in income you might experience after you retire to check the repayments will still be affordable. Find out more online by searching for mortgages for over 50’s.
Another mortgage option that might be available is a retirement interest-only mortgage. These are similar to a standard interest-only mortgage where you only have to pay the interest on the loan each month, however there is one crucial difference.
It is assumed that the loan itself will only be repaid when you die or sell the house. This means that the affordability criteria is assessed on your ability to make the interest payments and you don’t need to prove your ability to repay the loan itself at the end of the term, as you would with a standard interest only mortgage. It also means that you may be able to access additional funds when you remortgage. You can read more about interest-only retirement mortgages online and about how they compare to equity release lifetime mortgages and learn about the difference between a lifetime mortgage and a retirement interest-only mortgage.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for somewhere to start, you can speak to a qualified financial advisor and get high quality advice on residential, retirement interest-only, equity release and buy-to-let mortgages.
If you are over 55 and have a defined contribution pension, you might want to consider drawing money down from your pension as an alternative to equity release. Accessing your pension is a significant financial decision however that you will need to consider carefully. With increasing life expectancy and a rising state pension age, it’s vital to think about how you will fund your retirement and consider the long-term impact on your retirement income of dipping into your pension savings.
If you have a defined benefit or final salary pension and are considering transferring it to a defined contribution pension to access some of the cash built up in it, this is very rarely the right decision.
In addition to the many online articles, there are other sources of help available. If you’re 50 or over and have a defined contribution pension, you can get free guidance on the options available to you from the Government’s Pension Wise service.
However, if you want personal recommendations or advice about your specific circumstances, you’ll need to seek professional financial advice. You can find a local financial advisor by searching on the internet. Just make sure they are regulated and qualified.
If the amount you’re looking to access is relatively small and you can afford the monthly repayments, you could consider a personal loan or balance transfer credit card to help make ends meet in the short term. Before taking out a 0% balance transfer credit card, it’s important to make sure you are confident that you can pay down the balance before the rate reverts to its expensive standard rate. You can read more about the difference between balance transfer credit cards and personal loans.
We know it’s not always possible, but if there is any chance you can raise the money you need from cutting costs and living off a strict budget it is certainly worth considering. No doubt it will be more difficult in the short term, but your long term financial health will thank you for it.
Try to boost your income
Depending on your personal circumstances, you could consider taking on a full or part time role to make ends meet. It won’t be suitable for everyone and is a very different lifestyle choice but if you are interested in exploring options, on our careers hub we have tens of thousands of jobs with age diverse employers across the country.
It’s also worth ensuring that you are claiming all the Government benefits you are eligible for, especially if your income has fallen recently, you may be eligible for financial help from the government. To find out which benefits you may be entitled to, and how to claim, visit the government’s benefits calculator here.
As releasing equity from your home is a significant financial decision, it can be helpful to do as much research as possible before making any decisions. It’s currently a requirement that you speak to a qualified financial advisor before signing up for an equity release plan, to ensure that it is suitable for your circumstances and that you’ve made an informed decision based on all the available information.
It’s essential to use an advisor who has an equity release qualification and who can recommend a suitable product for you from a member of the Equity Release Council, which is the trade body for the equity release sector. This ensures that a number of minimum product standards will be met to help safeguard borrowers.
If you’re looking for somewhere to start, get proper financial advice from someone who is an active member of the ERC and can advise on equity release mortgages from the whole of the market. They’ll listen to your needs and talk you through your options, so you can decide if equity release is the right option for you.
Finally, if you think you have been mis-sold equity release you should contact Claimline Legal on 0800 779 7457 now or go to www.missoldequityrelease.co.uk for a free no obligation case review.
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