Your son just turned 25, and as part of his birthday gift, you want to finance his new venture, content creation. He wants to create a website that journals your trips around the world and one that can make him money. Since he doesn’t have the funds to have someone design his website, business logo and al help him market his content, you want to be his guardian. However, you have no idea how to do this. Well, you need not worry since by checking out some viable equity release quotes you can get enough money to finance his venture and also afford another trip to Seychelles or Malaysia.
Equity release1 is a financial product that allows homeowners to release the equity tied up in their homes by turning it into either a tax-free cash lump-sum2 or as a monthly income. The plan, unlike the standard mortgages, doesn’t require you to pay any monthly repayments. You only repay the loan when you die or move into residential care. It also enables you to retain your ownership of the estate for as long as you want – you’ll lose ownership of the estate when you pass on. The plan provider puts up the house for sale and takes the loan amount and any interests accrued over time (for the lifetime mortgage).
There are costs involved with these schemes, and since the Equity Release Council3demands that you go through a rigorous process, these expenses are undoubtedly unavoidable. Your financial advisor will help you figure out these costs and also recommend the best equity release company and favourable quotes that help you get the best equity release plan for your situation.
Nevertheless, the total expense you’ll incur by taking out the equity release plan depends on:
The application fees – the average cost of planning for equity release is between £2,000 to £3,500 and involves costs such as:
- Costs for financial advice
- The plan provider’s expenses
- Property appraisal fees or insurance for arranging your plan
- Professional’s costs or the legal fees for the solicitor
There are also interest rates4charges which have been between 3.5% and 7% – and that could be the agreed value for the loan’s lifetime. The interest you pay when the equity release lifetime’s end is dependent on how long the plan will run and the type of scheme you select. It’s also vital to remember that the scheme will come to an end when you’re ready to sell your estate or move into long-term care.
With the lifetime mortgage plan, for instance, since you don’t make any monthly repayments, as the life of the loan continues, the interest rates mount up quickly. Every year the interest due is added to the loan amount, and from then on, it keeps on accruing more interests. It means that your debt will increase rapidly over a specified period.
It’s therefore imperative that you sign up for an equity release plan that features the ‘no negative equity guarantee5’ since it’ll safeguard your family from owing the equity release company more than the initial value of your estate. Moreover, by opting for the voluntary repayment lifetime mortgage option, you can pay your interest charges early and just pay the loan amount at the end of the loan term.
So, you can help finance your son’s venture. With equity release, all your financial problems are a thing of the past. You just have to make sure that you seek advice from your financial advisor so that they can help you navigate through the specifics of the scheme so that you can figure out if it’s the best option for you.