EQUITY release rates have plunged to record lows – but is it right for you to use the money tied up in your home?
Lenders are currently offering extremely low rates with the cheapest deals available for 2.68 per cent.
Just a few years ago it was not uncommon to pay double this rate of interest, so if you have been considering equity release for some time it is worth speaking to an adviser.
- Find out how much equity you could release
At today’s rates the savings you can make over the lifetime of a loan could amount to tens of thousands of pounds.
This can make a huge difference to the amount of money you are able to leave behind as an inheritance, because the interest does not roll up so quickly.
With equity release, any money you withdraw, plus the interest that is accrued, is repaid from the sale of your house upon death or when you go into long-term care.
- Calculate your equity for free
At a current market-leading rate of 2.68 per cent it would take over 24 years for the amount you borrow to double in size, whereas if you had taken a deal at 7 per cent a few years ago, the loan would double every 10 years.
If you took out an equity release plan more than 12 months ago it is also worth considering whether you could save money by switching.
An adviser will be able to calculate whether the amount you could save is greater than the penalties you would be charged by leaving your existing plan early.
- Find out more about switching plans
What are the dangers with equity release?
Equity release can harm your eligibility for state benefits, as the government considers the money as income.
Also, it’s important to only unlock cash that you need to spend.
It’s worth doing your research before you take on equity release.
You have to be aged 55 or over to take advantage of equity release and it may involve a home reversion plan, or a lifetime mortgage which is secured against your property.
To understand the features and risks, ask your adviser for a personalised illustration. The actual rate that you can secure will depend on your individual circumstances, an advisor can discuss this with you in more detail.
As well as the low rates, equity release plans are now more flexible than they were in the past.
You can choose whether you want to receive a monthly income or take a tax-free lump sum.
It is essential that you pay off any existing mortgage that you may have with the some of the money that you release, but once you have done so any money you release is yours to spend as you choose.
An independent adviser like Age Partnership will tell you everything you need to know about equity release including the effect on the amount of inheritance you can leave and whether your entitlement to means-tested benefits could be affected.
- Instant equity release calculation
Age Partnership will also give you a free quote and only if you choose to proceed would you pay a typical fee of 1.95 per cent of the amount released or a minimum of £1,495.
Please remember to compare fees before going ahead with equity release.