If you’re living in Manchester and looking into equity release at the moment then your first priority should be to get a good overview of how it all works. As with any new topic, the best way to approach this is by looking at the big picture; then, once you’ve grasped the basics you can get into the details further down the line and avoid that horrible feeling of getting lost in it all! This simple guide will introduce the most popular forms of equity release and explain the protection available to you if you do decide to take one of these options.
It’s easy when you know how…
It’s understandable to be slightly overawed by financial matters. The very phrase “equity release” is enough to send shivers down the spine for some. Actually though, it’s all quite easy when you know how, and releasing equity is an extremely common move. There are thousands of cases out there of parents wishing to release equity in order to help children with the deposit on a first home in Manchester’s challenging property market. Equally there are thousands of cases of men and women who are semi-retired and simply looking to release equity for a few home improvements or for their retirement in the years to come.
A simple concept…
The lifetime mortgage is a good place to start as the concept here is actually very simple. It also happens to be the most popular form of equity release available. The quantity that you can borrow with a lifetime mortgage is based on the value of your property and will usually be anywhere from 18 per cent to 50 per cent of the total value. Generally the way it works is: the older the owner the more equity can be released; so those in their autumn years have the advantage. With a lifetime mortgage, when the home is finally sold, either with the move into long-term care or your passing, the money is repaid.
Within the lifetime mortgage option there are further choices to be made. Ring-fencing for instance is a way of ensuring that any family you wish to inherit will not lose out when the house is sold. In essence what this does is it protects a certain portion of the property. There’s also an option with the way the interest payment works: you can choose to pay the interest as you go along if you prefer to do it this way.
So you don’t feel vulnerable…
You may also have heard of a no negative equity guarantee in connection with a lifetime mortgage and wondered what exactly it was and how it worked. Like ring-fencing, it’s a way of providing you with a bit of reassurance because it guarantees that when the house is sold, the interest won’t ever be more than the value the sale can provide. The Equity Release Council is an organisation that exists to protect homeowners and prevent any nasty surprises like this.
An alternative option…
The other form of equity release that you’ll probably have heard something about already is a home reversion scheme. This involves selling your home, or a part of it, but continuing to live in it. You still have a legal right to live in the property until you move into care or pass away so it won’t affect your daily life as much as you might think.
When you’re considering equity release it’s worth remembering that, like all areas of finance, there are a great many myths that are perpetuated by an incomplete understanding of the subject. These can be off-putting, but if you do your homework and perhaps even consult a financial adviser before making a commitment, there’s really nothing to fear.
