There are a lot of pensioners who are suffering from mortgage debt and some of them are still making monthly repayments, even when their sole income is coming from their state pension. The Financial Services Authority, now the Financial Conduct Authority, has recently been highlighting the number of people who are planning to retire and still have some mortgage to pay. Some of these retired homeowners may have suffered from the failure of an investment such as an endowment, which is their way of paying for the loan. There is a solution in a remortgage equity release plan.
Answering the Question
The question for all these people left in the lurch is how they can get themselves out of the hole they may have dug for themselves. One such answer could lay in the use of equity release schemes in order to repay the mortgage debt, thus removing the future worry about struggling to meet the unaffordable mortgage payments.
Likewise, pensioners who have previously taken out an equity release mortgage from their home in the past can now take advantage of a remortgage equity release plan. Many people have experienced a remortgage of some form in the past and the reasons behind this course of action may have been many. One of the main reasons could be due to interest rates falling since the original equity release plan was taken out. By switching equity release schemes can therefore make savings of £1000’s in the long term. In 2004, the fixed rate for an equity release was around 8%; however, companies such as Equity Release Supermarket can today show rates starting from 5.57% annual.
Getting Proper Advice
To remortgage an equity release scheme is a very important decision that you have to make. In order to help in understanding more about this scheme then you can read some guides on the internet or you can hire the services of an independent equity release adviser. These guides will clearly explain how equity release really works.
Lifetime Mortgage Commitment
When you are taking on a lifetime mortgage commitments then you don’t have to make any repayments. Instead you will be charged with interest until such time that you die and the total amount which comprises the released money and the interest will simply be deducted from the value of your estate.
Please note there are different lifetime mortgages that can be used to remortgage a current loan. You have interest only products as stated above in that the interest is paid throughout your life. You also have a lump sum. This product offers you a lump sum of cash, but the interest is added to the principle sum and both are due at the end of your mortgage. For many this works out better since they will not need to have a payment each month.
Another choice is drawdown lifetime mortgage, but this only works if the remortgage need is very small. This is due to the mortgage offering a small lump sum in the beginning and then money to take as you need it. For some it could work, but be sure that you will not be in a more difficult position later.
Home Reversion versus Remortgage
In other types of equity release such as the home reversion method, part of your home will be sold to the reversion company and at the time of your death, they will at that point, claim their share. It is very important for people to consider remortgaging since their changes may have changed since the original plan was taken out. Health and family are factors that cannot ever be guaranteed and could therefore influence your future decisions and this render the original plan inappropriate or uncompetitive.
Talk with Family
You already know you need to speak with an adviser who can help you plan correctly. You should also make sure your family is part of the decision. It is your family’s inheritance that you are playing with when you take out new financial products. If you want to leave something behind they should at least be aware of what will occur with the family home. You can definitely leave inheritance depending on the product of choice. They can also be a second pair of eyes to help you read the fine print.
Before making a decision to remortgage equity release schemes, you should compute everything in order to verify whether this option is financially viable. You should also consider potential repayment charges as well as the plan set up costs when making this important decision.