Repaying your borrowed sum of equity release is usually the biggest worry for most homeowners. However, as there are now a number of different equity release plans available, this gives you several options when it comes to making repayments.
Essex Equity Release provide advice to all homeowners, individuals and partners. We make sure you fully understand the criteria of your plan and know how you can make equity release repayments.
Home Reversion Repayments
When choosing your equity release plan, you have the choice of both home reversions and lifetime mortgages. Home reversions are slightly different in the way you make a repayment. As a home reversion will mean selling part of your home to a third party, you are not actually borrowing the money and therefore there is no interest or loan repayment.
However, when the property is sold, the percentage owned by the 3rd party will go straight to your provider. This will mean you do not receive the full value for your property to then make the repayment. If your provider purchased 40% of your home’s value at the beginning of the equity release plan, this will mean they are owed 40% of whatever your property is sold for when the plan comes to an end.
Voluntary Repayment Plans
When looking to safeguard inheritance and control your equity release balance, voluntary repayment plans are an ideal option. This plan will give you great flexibility as, rather than the interest piling up, you can continue to make repayments each year without any penalty. Whilst this won’t be the best option for everyone, if you can afford to make early repayments it could be an easy solution for your repayments.
Voluntary repayment plans will allow homeowners to repay up to 15% of the amount borrowed each year. As no penalty is received with this early repayment, it can be a great option to ensure homeowners can pay off money borrowed from equity release as soon as possible. This type of plan is also a great alternative if you have been declined for an interest-only lifetime mortgage.
If you were declined based on affordability, voluntary repayments require no proof of income which could work in your favour.
Long Term Repayment
Traditionally, equity release plans have been created to provide you with a long term financial solution. With the majority of equity release plans that are used, you will be expected to make the repayment when both you and your partner either pass away or move into long term care. This means your property is sold and therefore the equity release will be repaid from the sale of the property.
The amount of equity release you owe will be based on how much you borrow and the interest that has accumulated over the years. This is why voluntary repayments can often be a great option as less interest may have to be paid. However, there are many suitable plans available that will ensure you do not have to pay too much when the house is sold.
Repayments Subject To Criteria
There are several other ways repayment may have to be made. This will depend on the criteria of your plan and what it allows. With some plans, you will have the option of making monthly repayments. Although equity release is commonly used to ensure repayments are not required for a long time, monthly repayments can be made if this is the best option for you.
If you need to make early repayments, this is also possible without choosing a voluntary repayment plan or monthly repayments. However, it could mean you will receive a penalty for making early repayments if this was not in the criteria. Alternatively, you can also find plans that will allow you to both move home or switch equity plans. This could mean that payments are required earlier to switch home or plans.
Essex Equity Release will advise you regarding the equity release plans available and how repayments are made. We can organise a quick consultation for all our clients. You can easily book a suitable time and location for you or complete consultation over the phone or via email. Make an enquiry and call 01268 799211 or fill in our contact form for a fast response.