Why Now Might Be The Best Time For You To Release Equity From Your House
This year the number of equity release products available has tripled compared to 2021, to an excess of 1500.
This huge raft of options on the market may spell good news for borrowers as it offers more choices and better rates, thanks to the competition it inevitably brings.
But with such an array of deals, how can you be sure equity release is suitable for you?
What is Equity Release?
Most people have heard of equity release but don’t know what it is or how it works. In basic terms, equity release allows you to unlock the value of your home without having to sell up and move out.
The funds released can boost income, renovate your home, or do anything else you desire.
Equity release loans are available for those over the age of 55. Such loans are repaid through the sale of the property when the last surviving borrower has either passed away or gone into long-term care.
There is interest to pay on equity release loans. As this is often not paid until the loan is repaid, it can quickly add up, thanks to the power of compound interest. However, many products now have the option to make monthly payments towards the interest, which can help keep the debt manageable and protect any potential inheritance.
Although interest rates have risen in recent months, some deals are still to be had, especially if you are already using an existing Equity Release loan. It is possible to swap providers in the same way that changing mortgage providers can be easily done.
For example, interest rates for equity release products in 2016 sat at around 6.15%. The current market offers rates of 4.33%. Put in perspective, this means that for anyone who borrowed £80,000 in 2016, if they switch to the lower products currently available, they stand to save over £50,000 compared to staying with their existing product.
Why New Equity Loan Products are Better
In addition to the chance that current equity loans offer significantly cheaper rates than you may currently be on, modern equity release products often provide the borrower options that older products did not.
Flexibility, in terms of payment, is on the rise. Some providers are now offering the ability to make voluntary payments of up to an agreed percentage of the original loan amount each year. This helps to bring down the overall cost and means that less interest is added to the outstanding loan.
Fixed, early repayment charges on equity release products have now become ubiquitous. This means customers can know in advance the amount they will need to repay should they decide to end their equity release loan early, making it easier to change, replace, or pay off your equity release loan.
In addition, should you need to move house for any reason during the life of your equity release product, it is now possible to do so with some providers, whereas, in the past, this was not an option.
Why is now a good time to review existing equity release plans?
You may have noticed that your money no longer goes as far as prices continue to climb in our current cost of living crisis. Rising utility bills, food prices, and travel costs can all add up, eating into your available monthly income and leaving you struggling to make ends meet.
If this is the case for you, then an equity release may be a way for you to supplement your income and ease the financial pressure. If you are already on an equity release plan that you have had for at least 12 months, now might be a good time to review the deal to see if there are any new products available that could save you money.
With some of the lowest interest rates for lifetime mortgages ever seen and an increase in average house prices of 17% in the last five years, the chances are that you have a lot of potential value locked into your property. An equity release could allow you to release that stored value into usable funds to make your life easier.
Before considering any equity release, it is essential to research and understand the risks involved. Seek professional advice from an independent financial advisor to find the best product for your needs.
If you’re thinking about equity release, be sure to speak to Expert Financial today. They will be able to answer any questions you have, and they will also be able to offer guidance on the best way to release equity from your home.
It is important to use a regulated equity release broker. This ensures that they have the correct licence and are qualified to give you advice. You can check if your broker is regulated by the Financial Conduct Authority (FCA) by searching for their name on the FCA Register.
Expert Financial LTD is an experienced mortgage broker offering whole of market mortgage advice in St Ives, Huntingdon, St Neots and the surrounding Cambridge areas.
