Equity Release – Watch Out For The Redemption Penalties
Equity release has been a fantastic product for many retired people, it has helped them raise cash to fund the projects that needed to be completed or fulfilled dreams they had. There is however, if you are not careful a sting in the tail to it all.
One of the biggest criticisms of equity release is the early redemption penalties that are carried by the products if you wish to pay them off before you die or move into long term care. The different providers have different ways of charging them, some link to the bank of England base rate and others use long term gilts prices.
What you must do when you research equity release is check the early redemption penalties that are attached to the product you are thinking of signing up for. The offer you receive from the lender should clearly outline the circumstances when a redemption charge would be payable, if the wording sounds complicated then ask your legal representative to explain it for you.
Ask the financial adviser that is recommending the product to you to give you a comparison of the redemption charges of each of the plans he or she thinks are suitable for you. This way you may favour a product that will be more expensive in the short term but could be considerably cheaper in the long term if you want to redeem it.
There are many reasons why someone might want to redeem an equity release scheme, some of the most common are that they have received an inheritance from a family member or relative, it might be they wish to move home or go and live with family. Whatever the reason, by careful planning at the research and purchase stage you can eliminate or minimise the effect of an early redemption charge.
Your financial adviser and legal representative are duty bound to explain all the terms of the product to you and ensure you understand the risks, ensure you listen carefully to the explanations they provide and it will stand you in good stead later.
For research and advice from the whole market Equity Release Solutions will find you the most suitable equity release.
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