Homeowners Taking Out Equity Releases May Find Relief From High Fees if They Live with Family for Caregiving
Switching Places: No More Penalties for Equity Release Borrowers Moving In with Family
Got some health issues and need to move in with family? No problem, equity release borrowers can now do so without worrying about hefty penalties. The Equity Release Council has rolled out new consumer protections that see lenders waiving early repayment charges in this scenario.
Usually, borrowers must shell out early repayment charges if they decide to settle their loan before kicking the bucket. But now, these charges are scrapped if you're shifting in with family because of medical needs. You'll just need a medical certificate as proof.
Early repayment charges for equity release can be steep, reaching up to 25% of the amount borrowed in certain cases. These charges have traditionally put a damper on things, but they're a thing of the past with this change. Note that this only applies to Equity Release Council member lenders.
Equity release is a popular retirement option that lets homeowners aged 55 and over tap into the value of their homes. This can be done by taking a loan that's repayable after death or when entering long-term care. Most people opt for lifetime mortgages.
It's essential to weigh the pros and cons since the interest on these loans compounds over time and can be substantial, potentially reducing the inheritance value. Fortunately, many equity release plans now allow borrowers to pay some of the interest or balance back during the loan term to keep costs in check.
Here are ten crucial steps to take before considering equity release:
Ten Steps to Consider Before Using Equity Release
- Check Your Eligibility Ensure you fit the criteria – aged 55 or older, own a property worth at least £70,000, and live in it as your main residence.
- Know Your Plans Get acquainted with the different types – lifetime mortgages and home reversion plans.
- Seek Professional Help Consult financial and legal advisors who are members of the Equity Release Council for sound advice.
- Evaluate Your Needs Determine the cash amount you require and whether a lump sum or regular payments are best suited to your situation.
- Consider Health and Lifestyle Impact Ponder over any potential health changes and the need to move due to medical reasons – seek flexible plans with portability.
- Examine Fees and Charges Understand all charges, including arrangement fees, interest rates, and early repayment charges.
- Consider Repayment Options Explore different options to repay the loan to manage interest.
- Inheritance Tax Implications Consider the impact on inheritance tax since equity release can reduce the value of the estate.
- Understand 'No Negative Equity' Guarantee Look for equity release plans featuring a guarantee that your estate won’t owe more than the property’s value.
- Future Housing Needs If you anticipate needing to move due to health or family reasons, bear portability in mind – this allows transferring the loan to a new property if it meets the lender’s criteria.
Stay informed about future changes in equity release regulations, especially concerning moving due to medical reasons, for a hassle-free experience.
- The Equity Release Council has agreed to waive early repayment charges for those moving in with family due to health issues, a provision that will benefit many property owners with mortgages.
- When assessing equity release options, it's crucial to examine protections regarding loan repayment, such as the 'no negative equity' guarantee and portability features for future needs.
- As you age, keeping your personal finances in order becomes increasingly important, and that includes understanding the implications of equity releases on inheritance and pensions.
- The parliament may consider amending its pensions and loan regulations to ensure individuals launching health-and-wellness businesses or providing family-health care services can still access funding.
- To maintain financial stability while focusing on mental-health issues or parenting, consider diversifying your investments to include sectors like health-and-wellness, science, and finance.
- The government incentives for promoting aging-in-place solutions might include provisions for subsidized home renovations and safe-housing protections to ensure the safety and comfort of senior citizens.
- Aging parents can seek assistance in managing their personal-finance affairs by entrusting a family member or professional financial advisor with the task of planning for their future healthcare and mental-health needs.
- When faced with the decision to downsize properties for financial reasons or to maintain a family-health care arrangement, explore the services offered by health-and-wellness real estate agents who specialize in accommodating specific health conditions.
