Many benefits come with an Equity Release. For example, there are no restrictions on how you can use your money. The Equity Release is tax-free and you can receive it as a lump sum amount. You can also opt for periodic deposits into your bank account if you prefer it that way. However, there are many questions that people have when it comes to Equity Releases. Receiving answers to these questions is important before you sign any contract accepting an Equity Release. Here are the top 5 questions to ask before making a decision on Equity Release.
1. Can I get an Equity Release even though I have an unpaid mortgage?
Many people believe that receiving a responsible Equity Release is impossible if they have an unpaid mortgage. The rationale behind this belief is that financiers cannot lend someone money based on an asset that has debt attached to it. Usually, that is the case, but Equity Releases work differently. In this case, a lender releases your home’s equity. The lender considers the mortgage you have already paid as he releases this equity. Moreover, he examines your ability to repay the rest of it.
2. Can I change the plan that I had opted for when I took the release?
Sometimes, people make decisions based on their current circumstances. These circumstances change as time goes. For example, you can opt for a particular Equity Release plan today then you realize that you need to change it tomorrow. Ask your lender whether changing your plan is possible before you enter into a contract with him. For example, can you switch from periodic payments to a lump sum payment and vice versa? In most cases, changing your plan is possible and there are no penalties attached to this move.
3. What happens to my home and equity if I opt for long-term care?
A recent study revealed that the number of elderly people needing 24-hour care would double by 2035. You might opt for long-term care in the future. What happens to your home if you go for long-term care? Will the lender sell it so that he can recover the Equity Release that he gave you? Imagine that you have a spouse and only you go for long-term care. Will the lender take hold of the property? In most cases, he will not. Instead, your partner will live in the house in peace for the rest of his life.
4. Can I move to another house even though I got an Equity Release?
Sometimes, you need a breath of fresh air in a new neighborhood. A change of scenery would help you live out the rest of your days in peace. However, the Equity Release that the lender gave you was for a particular house in a specific area. Would the lender take hold of it if you decided to change your location? No, he would not. You can move if you want but informing your Equity Release lender before you move is an excellent idea. Inform your mortgage lender as well.
5. Are there hidden costs before, during, or after I sign the contract?
Equity Releases have costs attached to them. For example, legal fees are costly whenever you are going for an Equity Release. Valuation charges are also likely. However, no one hides these costs. Instead, lenders inform their clients about them as soon as possible. Unfortunately, some unscrupulous lenders attach other fees to Equity Releases. Homeowners rarely know about these charges until they see suspicious deductions in their periodic payments. Talk to your lender. Ask him to clarify all the charges before you sign the dotted line.