Find out the Advantages and Risks Associated with Equity Release
How does the lifetime mortgage work? Simply put, lifetime mortgage, a type of equity release, refers to a long term loan you secure against your home. This loan, and the interest accrued, is repaid from the sale of the property; however, this happens only after you die or move to a long term care facility.
Before you decide whether such an equity release scheme will be an appropriate financial solution, you need to find out the advantages and risks associated with it. You may find these details from online resources. However, these are only general guidelines and you need to opt for professional advice and guidance before you choose any such scheme.
Here are the advantages you may avail of from the lifetime mortgage schemes.
The chief advantage of the schemes is that you may spend the sum of money you get on anything you want without tax consequences. Whether you want to pay for something particular or want to have a better retired life, this money can come in handy.
Another advantage is that you still own the property against which you get the money. You can continue to live in the property until death or until removal to a care home. You may also shift to another property if it is permitted by the financial service provider.
You need not bother about the repayment of the loan during your lifetime. The loan amount and the interest are repaid after your death or after you move to a care facility by the sale of the property.
If you opt for a scheme that guarantees no negative equity, there is no risk of repaying more money than the amount accumulated from the sale of the property. However, it is necessary to sell the property at the best price obtainable.
There are a number of advantages of lifetime mortgage schemes. However, there are certain risks associated with these as well. Only an individual consultation with a financial adviser will help you understand its appropriateness. Here are the things you need to think about before opting for such an equity release scheme.
A lifetime mortgage implies a long term commitment and you may have to handle its present and future consequences. It may be necessary to pay a substantial amount as an early repayment charge if you repay the loan in your lifetime.
There are no tax consequences on the amount you get from the equity release of the property. However, it may affect your tax situation. It may also have an effect on the means tested benefits you are eligible for.
When you opt for a lifetime mortgage scheme, there is a considerable reduction in your estate. The inheritance you leave behind for your family also suffers due to this. However, an inheritance guarantee available from certain equity release schemes UK may be helpful in avoiding this. With this, you may leave a certain percentage as your inheritance.
Only a consultation with a professional financial adviser would help you in this regard.
Author Bio
Sophia Webb is a financial adviser. She provides help and guidance with regard to the advantages and risks associated with the equity release schemes UK.
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