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Is an Equity Release Cheaper Than Taking Out a Mortgage?

When comparing an equity release plan to a mortgage, you will notice that there are several differences. In most instances, deciding between these two is not quite as easy as simply comparing figures. You also need to establish whether you qualify. Mortgages have specific prerequisites while equity release plans have different rules and regulations. For instance, mortgages are often easier to obtain at a younger age while equity release plans usually require the homeowner to be at least 50 years old in order to qualify.

A standard mortgage is usually repaid over a predetermined period of time. Equity release plans, on the other hand, only need to be paid in full upon the sale of the home. So, if the homeowner passes away or needs to move into a long-term care facility, the agreed amount will need to be repaid. It is crucial to understand that, if you decide to sell your home within just a few years of agreeing to an equity release, you could be liable for early exit fees. These fees are documented in the agreement itself which is why it’s always good to take your time to read through everything properly. It also wouldn’t hurt to have a legal advisor look through the agreement before you sign.

While some plans do not require any kind of monthly payment, there are those that allow you to pay back the interest on a monthly basis. The remaining amount of the actual equity release will be repayable upon the sale of your house. A mortgage requires regular monthly payments and these need to be made no matter what.

Each option has its own set of advantages and disadvantages. Remember that there are several options like lifetime mortgages and home reversion plans to choose from but it’s important to understand exactly how each of these could prove beneficial. Once you have analysed these options, you can then compare them to a regular mortgage and decide for yourself which financial decision is best for your needs. It should also be noted that equity release plans allow you to tap into the value of your home without forcing you to move out. So, you can get the money you need without having to downsize or move out.

Other factors that need to be contemplated include the value of your property and interest rates. This is why the help of an independent financial advisor is so important. Not only will they provide you with helpful information but, since they aren’t associated with a specific financial institute, you will receive unbiased information.

Source by Andrew Larkin

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