We have compiled some helpful tips so that you can maximize your equity release inquiry. The following advice highlights some of the most important things that you need to consider about this potential solution.
1. Avoid paying to get advice
A majority of equity release companies charge £500 to £2,000 for their advice. However, why pay for advice when the expertise that you need is available from StepChange Financial Solutions for free? We established our service to provide you with expert advice without commitment or cost from qualified advisors.
2. Consider all of the alternative solutions that are available to you
Releasing equity from your house is a very significant decision to make and one that should never be taken lightly. When you consider all of your options you might either reduce how much money you need to borrow or eliminate needing to borrow altogether.
Reducing the amount that you release can significantly reduce your plan’s long-term cost and provide you with access to deals that offer greater flexibility and are better all around.
The following are the most common alternatives that can be considered:
- Home improvement grants
- Claiming all welfare benefits that are available, like a pension credit
- Using existing investments or savings
- Borrowing from friends or family
- Downsizing – selling and moving to a less expensive property
3. Only borrow the amount that you actually need
Write out a detailed list of everything you plan to spend money on. You don’t want to end up paying interest on any money that you don’t really need right now.
If there is a good chance that in the future you will need more money, a ‘flexible drawdown’ plan and provide you with additional funds when you need them. It can be much more cost-effective to borrow money gradually compared to taking out a single lump sum amount of cash.
4. Consider paying the interest charges monthly or annually
If you are able to afford it, the most effective way to manage the cost of your release is to pay the interest either annually or monthly. There are many plan providers that allow you to make monthly overpayments or repayments of interest.
Even if you cannot afford the full interest payment, you can reduce your costs significantly by making overpayments or partial repayments.
5. Don’t just a plan solely on interest rate
Although it is very important to have a competitive interest rate, you also need to consider how your future needs will be met by your plan.
- The following are some of the most important questions to ask when selecting a plan:
- Is it possible to repay the plan and will there be early repayment charges applied?
- In the future can additional funds be borrowed and what costs are involved?
- Can I move the plan to a different property?
- Who will be the owner of the property?
- Does the Financial Conduct Authority regulate the plan?
- Does the plan meet the Equity Release Council standards?
Any plan that you select needs to meet whatever immediate needs you have and also be flexible enough to be able to adapt to future life changes. If you’re interested then find out more about what equity release is and how it works
6. Involve a trusted friend or family members
It isn’t necessary to do this but we do strongly recommend that you get together with your family to discuss your plan. If you decide to not get them involved, you might want to inform them that any future inheritance might be eliminated or reduced.
If you choose not to involve your family, then we suggest that you talk to a trusted friend about your plans. Informing your estate executors is also a good idea since they might need to deal with the equity release provider once your home is sold.
