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Your Questions
ANSWERED
Equity
Release! 5
by DAVID TROY,
Is it a good idea?
MANAGING DIRECTOR,
HomeBuyer Financial Services
The words Equity Release seem to send fear into the hearts of market, as they will have a good understanding of the market,
many; this is all based on the media hype of UK Lifetime and the providers, the current rates, special offers and finally but
Reversion mortgages. In the Channel Islands these products most importantly the flexibility of your current mortgage
are not available; our equity release products available through provider.
mortgage providers in the Islands are a basic and simple
format. Potentially they could save you a considerable amount of time,
pressure and by re-mortgaging to provide your equity release
If your home has increased in value since purchase, your lender monthly expenditure. In the last few years it has finally become
will be able to release some of the difference between current more reasonable as a cost to move your existing mortgage
valuation and your existing mortgage (i.e.) Current mortgage either to just save money (not increasing your mortgage) or to
£190,000.00 current valuation £385,000.00 would allow you release equity, whilst moving your existing mortgage and the
the ability to draw a release of up to 90% of current valuation savings that you can make on a monthly basis due to interest
£346,500.00 equating to £156,500.00. Which can be utilised rates can more than cover the cost of moving your mortgage
for a number of purposes further increasing the value of your facility from one provider to another.
property (extension, conservatory, loft conversion, renovation,
landscaping the garden and refurbishment, new kitchen, Most mortgage providers apply early redemption charges (ERCs)
bathroom) or used for deposit/outright payment of a property to mortgages, such as fixed rates and discounts. An ERC is
abroad, it does not have to be connected to your home and can usually calculated as several month's interest on a loan, and can
be used for more or less anything that you wish for. run to thousands of pounds. You may be charged an ERC if you
pay off or switch your mortgage within a certain time period.
Obviously, there are some simple criteria that have to be met; Before going too far down the route of re-mortgage, check
you have to have the earnings to match the revised mortgage whether ERCs apply to your existing mortgage package, and if
and the ability to meet repayments over the term of the so, how much they will cost and discuss with your adviser.
mortgage.
Some providers are so keen to get your business that many
Like anything in this day and age there are certain caveats that have developed special re-mortgage packages which may
need to be understood, the increased mortgage payments, reduce the costs, another reason to visit an Independent
possibly longer term of mortgage, increased debt, but as long as Financial Adviser. So they may well pick up the tab for the
these are discussed and understood, this is a much better and valuation, and even pay your legal fees.
potentially cheaper way to gain access to additional monies
than a personal loan or credit card, again dependant on the You can re-mortgage as many times as you like, and as often as
term of your mortgage. you like. But bear in mind that you may well be liable to pay
ERCs if you are currently on a fixed, capped or discounted rate.
If you have age on your side the total monthly repayments may
not increase by any considerable amount, as you have the Summary
ability to extend your mortgage further, some mortgage Overall for both of the above mortgage products it is important
providers are now willing to look at mortgage facility up to the to seek quality independent and impartial advice and in reality
age of 70, in this instance you must understand the for many years people have ignored their mortgages not given
implications of taking a mortgage into retirement. them the time when trying to work on their overall financial
planning, but you should review your mortgage every year and
The title of the article implies that both equity release and re- see whether you can save money, this really is an important
mortgaging are one and the same, they are different, however, part of your financial planning as care and attention to this area
this is the reason that you should utilise the services of an can save you tens of thousands of £’s over the lifetime of your
Independent Financial Adviser who deals in the mortgage mortgage.
20/20 fifty two
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