Dear Dean
Do you have a question about equity release or planning for your retirement? Pose your question to Dean Mirfin, our resident financial expert for all your financial queries.
Q.I’m considering equity release but I’m a bit concerned about the early repayment charges on these plans – is there a way to avoid them?
A.Since equity release is designed to be a lifetime commitment, many plans do carry early repayment charges for the early years of the plan. And with varying interest rates, this is becoming more important as more people review their equity release plan to achieve a better deal. One option is to wait until the chargeable period has expired, which varies according to the plan chosen. However, one new equity release provider has taken this into account and doesn’t have any early repayment charge applicable on the plan. To find out more about this option, call us free on 0800 915 9116.
Q.Can I release cash from my home to clear my outstanding mortgage?
A.This will depend on the value of your property and the amount of mortgage outstanding. After entering retirement, a large monthly mortgage payment can be a huge drain on finances, so equity release can offer a way to remove this payment altogether. The best course of action would be to speak to one of Key’s specialist advisers. They’ll consider your current situation and advise you how much cash you could release from your home.
Q. I don’t want to take out a lifetime mortgage on my home, I’d rather sell a share of it. How does this work, and could we release more cash at a later date?
A.The alternative to a lifetime mortgage is a home reversion plan, whereby you sell a percentage of your home to the reversion provider. The main benefit of this type of plan is that both parties can enjoy any growth in the value of the shares of the property they own. So, if you sold a 50% share, you and your estate would benefit from 50% of any growth in the property’s value.
It’s worth noting that you don’t receive the full market share for the part you sell, this would be discounted, according to your age, to reflect the fact that you are granted a lifetime lease to remain in the property rent-free, for the rest of your life. As for further releases in the future, this may be possible, depending on the amount you originally sell, your chosen plan and the property value.
Whilst you may feel that a reversion plan is right for you, we would always recommend you seek full independent advice on your options. At Key, we always search the entire market before making a recommendation, to ensure you receive the very best advice.