Equity Release - Considerations

When looking into equity release it is essential that you seek the advice of a specialist such as a financial advisor. A financial advisor will be able to assist you in determining whether this step is the right step for you. The first thing you should know is that equity release should be considered as a last resort option.

What can the cash obtained through equity release be used for? The answer is just about anything you can think of. It can help with Inheritance Tax planning or any other type of assistance you may need. Here is how it works. There are two primary ways that equity release works. The first is Reversion and the second is Lifetime mortgage.

Under the Reversion plan you could sell all or part of your home for tax free cash. Keep in mind however that the percentage of the home that you sell will not equal the cash you will get. Normally, you will get less than the percentage value of your home. Under the lifetime mortgage plan you are granted what is called a tax free loan. It is borrowed against the security of your home. On this plan you make no repayments until the house is sold. This is usually at the time of demise or when you would enter a care facility.

On lifetime mortgages there is also the interest that is charged though is not collected and it is cumulative which means that you will, at the end of the loan not only pay the interest on the principal amount that was borrowed but also interest on all the interest that accrued. Confusing and expensive sounding right, this is why when considering an Equity Release Considerationsit is essential to obtain assistance through a financial advisor.

Here is the difference between the equity release options with Reversion you will for certainty give your beneficiaries the proceeds percentage from the sale of the home that was left over from the release. For example, if you did an equity release under this method for 40% of your home then your beneficiaries would receive the proceeds of 60% of your home when it sold.
Lifetime mortgage works a little differently. The big difference is that if you die during the early part of the plan within the first couple of years for example. Your beneficiaries are going to be better off. However, if you do not you may end up reaching something called Negative Equity. This means that your loan would actually exceed the amount that could be obtained through the sale of the house. Not only leaving you with nothing to provide for your beneficiaries but also a mounting debt for them to pay off.

There are other factors to consider but these are the biggest factors that appear when considering equity release and the largest reasons why the market as a general rule views equity release as a final option measure to be used primarily in dire emergencies where there are no other possible options.

If you are considering an equity release it is important that you talk with your financial advisor and thoroughly discuss what each option could mean for you both what you will receive and what you may end up having to pay back. Your financial advisor will be able to assist you in determining if equity release is right for you and if it is which of the two schemes are going to be the best options for you.

Equity Release Considerations can provide you with a way to provide for your family when it comes to inheritance taxes or it can be used in an emergency to provide your family with the funds that are needed to ensure their security but this type of financial step is not without significant risk. In order to be sure that this is the only and best option for you take the time to obtain the counsel of a financial advisor.

Norwich Union Life results show strong equity release growth

The firm said this underlined how customers and advisers alike had benefited from its proposition enhancements and the strengthening of key IFA relationships in 2008. Volumes in Q1 had been driven by the significant pipeline of business of £75m coming out of 2008.

Dominic Fraser-Smith, group manager for Norwich Union equity release, said it regained the number one position in the overall market at the end of 2008 because it had achieved a 27% market share in the IFA channel in Q4.

“We have been prudently managing our risk in the turbulent property market, reducing our LTV scale twice since November 2008 and limiting the percentage of property value we will offer for higher risk properties.

He added: “The current market position has an upside for equity release in that with fewer house sales and difficulties getting credit, equity release remains an attractive option.”