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How To View Equity Release on your Home

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In these times of recession, many older homeowners are property rich and cash poor. With money not going as far as it used to, it makes sense to look at ways of ‘equity release schemes’ that can provide a practical solution to the problem. This enables homeowners to access some of their wealth and entail borrowing against the property, but only repaying capital and interest when the borrower dies or moves into institutional accommodation.
What you'll need: 
Independent expert advice
In the early Nineties there were schemes that ended in disaster when interest rates went up and house prices went down, resulting in thousands of pensioners having debts greater than the value of the properties to which they were secured.
Most of the major lenders have drawn up a voluntary code of practice for ‘safe home income plans’ (SHIP) with an aim to reduce the risks inherent in equity release.
Interest rates are double the going rate for conventional home loans and can double the size of the debt in just 10 years. Lenders justify charging more because they do not know when they will be paid back.
Most equity release schemes now guarantee that borrowers can stay in their own home as long as they live, and it would be foolhardy to choose a lender who does not give this reassurance.
Given the amount of money involved and the potential problems in this type of transaction, pay for an independent solicitor to study the documentation. Steer clear of any advisor who offers to ‘look over’ the legal paperwork for you.
Make sure that the contract allows you to move home without incurring any penalties or immediate repayment of all debts. Your circumstances may change and you may wish to move into sheltered accommodation.
Take into consideration that debts run up against your home will mean less inheritance for the family, and you may wish to discuss the matter before making any decision.
Avoid equity release schemes that do not provide a ‘no negative equity guarantee’.
Beware of ‘free advice’ since many financial advisers are paid commission by the financial companies, and it may not always be in your best interest.
If you are unhappy with any financial advisor or financial services, and they fail to give any satisfactory response, contact the statutory watchdog, the Financial Services Authority.
Equity release can provide an effective way to avoid inheritance tax because it enables the homeowner to spend more of their wealth before they die. Do not, however, make any rushed decisions that you or your familywill regretlater on.
Take your time and consider all the options
Insist on plain English explanations that lessen the risk of unpleasant surprises.
Don’t be pressurised into making a decision until all your questions have been answered by your solicitor.


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