The latest article by Laura Richardson discusses the matter of the relationship between equity release in Halstead and your estate value in what follows below.
If you are a homeowner over the age of 55 you may have considered Equity Release in Halstead as a way to get access to a lump sum of cash. The Equity Release Council sum up Equity Release as ‘a way of releasing the wealth tied up in your property without having to sell it and move to another home.’ Equity release mortgages are different from residential mortgages in that, rather than paying off the mortgage debt via a monthly payment, the entire mortgage debt is recovered from the value of your estate when you die. In this way, these types of mortgages can appear to be an attractive option.
However, it is important to consider the effect that this type of mortgage will have on the value of your Estate and therefore the inheritance that your beneficiaries will receive when you die.
There are two types of Equity Release mortgages. Firstly, a Lifetime Mortgage which allows you to borrow an amount of your house’s value, at a fixed or capped interest rate. If you decide to take out a Lifetime Mortgage, you will not necessarily make any monthly payments towards paying back the debt. The interest on a Lifetime Mortgage is compounded which means that the debt will build up extremely quickly and in many cases, by the time that you die, your Mortgage debt will be at such a level that your beneficiaries may not be left with much of an, if any, inheritance. According to MoneySavingExpert.com, the standard rate of interest for a Lifetime Mortgage is 5.14%. Therefore, if,
at aged 60, you borrow £20,000 on a £120,000 home, at aged 75 you will owe £40,000 and at aged 90 you will owe £80,000. With the debt figure quickly rising, it is important to factor in your wishes for your beneficiaries when considering a Lifetime Mortgage.
The second type of Equity Release is called a Home Reversion Plan. This is only available if you are over the age of 60. A Home Reversion Plan involves you selling a proportion of your home at a price well below market value, to a Lender who accordingly releases a lump sum of cash to you. When you die and your home is sold, the proceeds are then split according to the percentage owned by you and owned by the Lender. Therefore, if the value of your house price rises dramatically, so will the amount which will be paid out to the Lender upon the sale of your property.
Deciding whether an Equity Release mortgage is right for you is a complicated decision. Due to the effect that an Equity Release mortgage has on the value of your estate after you die, it is important that you carefully consider the impact that your decision will have on your loved ones once you are gone. If you would like to discuss Equity Release in Halstead or anywhere else in Essex, your estate value, or any other aspect of estate planning, contact us at Andrew Douglas Wills and Legal Services today. Whether in Halstead or the surrounding areas of Essex, we offer a free initial consultation during which we can answer any initial queries you may have regarding Estate Planning, your Will, and any other associated legal matters. Therefore, for an informal, no-obligation discussion, call today!
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