Since 1991, the Equity Release Council has standardized equity release, imposing strict regulations that protect both the consumer and the investor. However, there are still some equity release companies to avoid that don’t have these requirements. Ask for an explanation of their services from a licensing agent. Are they accredited by the EPC and approved by the FCA? Are their policies and practices in accordance with the code of ethics of the American Society of Security Dealers? These are just a few of the things that the equity release Council requires of its members.
If a company offers you an equity release offering, you have an obligation to evaluate it thoroughly. This means that you must not only look at the cost and type of the loan but also at the terms and conditions of the offer. You must be able to assess the possibility that your circumstances will allow you to pay the amount offered in the early repayment charges. In general, if a company offers you an equity release with early repayment charges, it is probably not a good deal. There are several situations where early repayment charges are appropriate such as paying off high-interest credit card debt or repaying student loans.
To determine if you are eligible for an equity release or not, ask yourself the following questions: Do you have sufficient monthly income to repay the lump sum payment? Will you be able to continue living normally and without having to resort to any form of financial assistance such as credit cards? How much equity do you have left on your property that can be used for the repayments of the offer?
Ask for financial advice from any broker that you have used before and find out what are his/her advantages and disadvantages. The advantages of a loan include the reduction of your monthly mortgage repayments, lower interest rate and exemption on capital gains tax. However, you might not get everything that you need from this deal.
Lenders will only release equity, if there are substantial assets. In most cases, you will only be eligible for this if you have sufficient equity and no other debts such as personal loans, car loans or payday loans. You will also have to pay some fees and closing costs incurred by the lender when you opt for an equity release. There is also the disadvantage of paying the lump sum to the lender when you are approved for early repayment charges.
If you are experiencing difficulty in repaying the lump sum payment, this is another reason why you should opt for an equity release. You will only be able to reduce the monthly mortgage repayments and will thus be able to pay back the money over a longer period. This means that you will not have to deal with so many lenders. However, as mentioned earlier, this is not always the case and there are so many lenders who will charge you a lot of fees and annual payments and thus will not agree to release equity unless you agree to pay these additional costs. This means that you should first determine the reasons behind your difficulties before you opt for this option. If it is due to bad financial circumstances, you will have to opt for this process.