Are you struggling to make your monthly commitments? Or perhaps you are looking to enjoy some of the finer things in life? The main question is obvious, how can you afford it? An equity release mortgage may well be the answer.
Equity Release mortgages are an effective means of releasing the cash that you may hold in your current property. They are primarily designed to release cash via a single lump sum, or in regular payments, with simple and easy to understand terms. They are intended for candidates that are over 55 years old who may be asset rich, but cash impaired.
Sadly, equity release mortgages brought a bad name to the market in the 1970’s and 1980’s, with some unsavoury headline news articles. However, today, we have come a long way. Mortgages are secured with a “no negative equity” guarantee meaning that, as a minimum, you will not owe more than the value of your home. The debt is simply collected from your estate on passing, and you will retain ownership to your home throughout.
There are also flexible payment terms depending on what suits you best. If you feel you can afford the monthly interest payments, then great, you can meet these each month and keep your debt as it is. However, if you feel that these would not be affordable, or you would prefer to keep a greater level of disposable income free, then you can opt for the “roll up interest” option. This simply means that your debt accumulates over time, with a final balance owing when the time is needed.
It must be noted that an equity mortgage is very much specific to your personal circumstances, and dependent on age at the time of application. The release of equity is typically capped at 50% of the value of your home, and interest rates hover around the 5-6% mark, so will always be higher than conventional mortgages. However, if you have a standard mortgage ending with no repayment strategy, or if you simply require a sum of money to boost your standard of living, etc, then it can be a fantastic option to explore.
So, does an equity release mortgage sound like something that you would benefit from? Let’s discuss what you need to consider before securing a deal:
Carefully plan out your budget – Consider your outgoings and picture what your ideal world looks like financially. Accurately decide what you may need financially not just for the present day, but also in the future, and be realistic about how much will be enough for you to live on comfortably.
Understand your current debt – Essentially, you are borrowing money, and this has to be repaid to the mortgage lender at some point. So it is crucial to be clear about how this will affect the total balance of your debt, and how it can build up over a certain period of time.
Talk to your family – An equity release mortgage is designed to be paid out when you pass away, so this can considerably affect planning out your inheritance. Make sure your family are kept well in the loop and make a decision (if you feel this is the right type of mortgage deal for you).
Is a standard mortgage deal more suitable? – If you choose a standard mortgage deal, then you may be able to borrow on a more comfortable basis and on more traditional terms. Ensure that you think about and consider all of the different options before looking into securing an equity release mortgage deal.
If you want to find out more, then speak to us today. Pinnacle Finance & Property Group are fully regulated in this area and can make sure that you have all the information to hand to make a fully informed decision.