Equity Release Pitfall To Avoid

Equity release is considered as an apt solution for the retired and non-working individuals who need to have lumpsum cash with them for old age security. More so, when they don’t want to put their property as a security or simply sell it and move to a new one to realize that amount of money.



However, while you are planning for equity release you should look into the potential pitfalls and risks it may have. Here are a few major points to take care of as per experts:
 

1. Mounting interest bills

If the equity release deal you have picked is based on lifetime mortgage, you must have borrowed money keeping your home as security. This is generally a full-term plan of fixed nature which could exceed to higher limits, even more than the property value if you live for a longer period. You should always go reputed services that are known to offer options with no negative-equity guarantee and better if you can pay your sum in easy monthly installments.
 

2. Missing out on house price rises

If you are going with the equity plan where you are selling a part of your property to a provider against a lump sum cash amount, you should consider the price hikes that happen over the period of time. You won’ be benefiting from the rise in the price of the parted property that has been owned by the provider. So, this needs to be considered well before you are planning for equity release and consider that price value hike as you get into the deal with the provider.
 

3. Limits on the amount you can release

Though you might have a good share in equity but that doesn’t necessarily mean that you can release a similar amount of money. The reason is simple, equity release providers don’t get paid immediately for the amount invested and the discounts they put on the amounts are large. Hence, there comes the difference in the limits of the amount that can be released.
 

4. Look for the alternatives

Equity release can be an attractive option if you look to grab some extra money at the time of retirement. However, you should always look into the calculations of interest charges and the opportunity cost that you might have to bear. So, you must better look for alternatives like downsizing to a smaller accommodation or sourcing money from other investments or by borrowing it from other institution. This would help you to abate and subside the overdependence on the equity part.
 

5. Get the right advice

Last but not the least. Get the right equity release advice from the experts in the field. Look for the best options available in your area and if you do not get one, go for online help. This could equally be helpful. Consider the equity release advisor who have hands-on experience working in the domain and should be someone who has served similar cases previously. This would ensure that you get the best results and would be able to avoid equity release pitfalls quite smoothly and assuredly.

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