How to Fund Your Holiday with Equity Release
Have you been you thinking about retiring or reducing the never-ending hours at work? Do you dream of vacationing in the Bahamas, making those life-changing home improvements, starting a restaurant business, or merely maintaining your lifestyle?
If you do, then you’ll appreciate how vital it is to have the capital to get to go crazy with your financial freedom – and not have to think about how you’re going to pay for these expenses.
However, if you don’t have a substantial pension vessel or savings in place, living comfortably in your retirement could be easier said than done.
It is where equity release comes in and with this simple guide; you can get to learn the ins and outs of this fantastic financial product and how to use it to fund your dream holiday.
Be sure to check out sovereignboss and see how much equity you can release with the equity release calculator.
What is Equity Release?
Equity release is a range of products that allow you to access the equity (cash) tied up in your estate if you are over the age of 55. You can opt to take the money you release as either a lump sum or, in several smaller amounts or as a combination of both.
That said, there are two equity release options:
Lifetime Mortgages
A mortgage can be taken out secured on your estate on the condition that it’s your primary residence. You also have the right of ownership, which is until the life of the loan ends, i.e., when you die or go into residential care.
You can opt to ring-fence some of the value of your home as an inheritance for your family. You’ll have to decide to make repayments or let the interest roll-up. You get to pay back the mortgage and any accrued interest when you die or when you move into long-term care. You can learn more about these here.
Home Reversion Plan
With this scheme, you sell part or all of your estate to a home reversion company in return for a lump sum or drawdowns.
You have the right to continue residing in the estate until you pass away, rent-free, but you have to come to an understanding that you will maintain and insure it.
You can choose to also ring-fence a percentage of the manor for later use, probably for inheritance.
At the end of the plan, your lender will put up the home for sale, and they share sale proceeds according to the remaining proportions of proprietorship.
Is It Secure?
Unlike in the 1980s and early 1990s, today the equity release market is controlled by the Financial Conduct Authority (FCA), and most equity release companies are signing up to the Equity Release Council, a trade body that sets the ideals for equity release schemes.
As part of these standards, the Council states that:
- Interest rates must be fixed, or if adjustable, there must be a higher limit or cap that is static for the life of the loan
- You have the freedom and right to stay in the estate for life or until you opt to move into residential care. Just so long as you abide by the terms and conditions of your mortgage,
- The lifetime mortgage must come with the ‘No negative equity’ guarantee meaning that when the plan provider decides to sell your house and the lawyers’ and agents’ fees have been taken into account, if the amount left is not sufficient to pay the outstanding loan, neither you nor your manor will be liable to pay any more.
Equity Release Summary
So to be sure that your equity release plan meets all the required standards, you need to ensure the plan provider you choose is a member of the Equity Release Council.
An equity release plan could be a simple way to unlock the cash in your estate and assist you in making your retirement unforgettable and worthwhile. However, it’s vital to consider whether it’s the right path for you.
Make sure that you always seek professional advice before making a decision. There may be other alternatives more suited to your conditions that you could use to access similar amounts of cash.
