So, you have reached that next stage in life or you’re nearing it – retirement. Now is the time to reap the rewards of all your hard work and enjoy this new chapter. Maybe you’re looking at taking a holiday, making some renovations to your home or buying a new car. As your offspring leave the nest and head to college or purchase a home of their own, maybe you want to pitch in and help them out with tuition fees or down payments.
An early equity release scheme looks like a great way to make those things happen,or is it?
What is equity release?
Essentially, equity release is a way to borrow against the value of your home. A lifetime mortgage is the most popular type of equity release and allows the owner to take out a mortgage on their main home. It is secured on the property and the homeowner is able to retain ownership.
Some of the property value can be earmarked as an inheritance for the homeowner’s children. They may also choose to make repayments or allow the interest to roll up, which is added to the loan. The amount of the loan, along with any interest is paid back when the homeowner passes away or moves into long-term care.
Why early equity release might be a bad idea
On the surface, early equity release probably looks very appealing. You receive a nice chunk of money, get to remain in your home, and you don’t have to pay back the money that you released until you die, or enter long-term care: It’s almost too good to be true,and often it is.
Yes, you get the money to do with as you wish – a holiday, home renovations, and more, but that easy money comes with a price – it’s called interest and it will eat you up. From day one, you are charged interest on the released money and that interest increases steadily as long as you have the loan. Eventually, it is going to add up and that could be devastating.
Robert Bull, the Chief Executive of RoyaleLife, the UK’s largest provider of bungalow living for the over 45’s, explains: “For example, say your house is worth £450,000 and you release £100,000. After five years, with an interest rate of 6.5%, you’ll owe over £137,000. After 20 years that figure will rise to £350,000 – which is nearly as much as your house was worth in the first place.”
This will eat into any inheritance that you might have wanted to leave for your children and grandchildren – it will all be consumed by the interest charges.
The only way to avoid the interest fallout from early equity release is to make payments on the loan and interest while you have it, instead of waiting until you have passed on and leave that burden of repayment on the shoulders of your heirs.
Is that the legacy you want to leave?Probably not and, fortunately, there is an alternative to early equity release for retirement.
What options do people have to help them retire comfortably
Homeowners do have some options – they can take out a loan and hope for a great rate, or they can borrow from their retirement or life insurance. They also have the option to do nothing. They can opt to toss away the idea of that dream holiday or that beautiful new car. Nothing ventured, nothing gained. Right?But is that any way to live?
There is another way, and it’s really shaking up the estate agency and financial planning markets.
RoyaleLife’s Home Part Exchange Programme, created and implemented by CEO Robert Bull, is often a better option for homeowners nearing retirement. It is a debt-free solution that allows you to get the cash you need without the burden of interest or repayment.
The idea is simple – RoyaleLife will pay you 100% of your home’s current market value. You exchange it for a luxurious RoyaleLife bungalow and whatever money is left over from the transaction goes into your pocket.
Robert Bull breaks it all down: “Let’s say that your current home has a value of £450,000. You choose a RoyaleLife bungalow that is priced at £250,000. When you go through the Home Part Exchange, you get your £250,000 bungalow AND £200,000 cash for you to do with whatever you want.”
RoyaleLife takes care of all costs and fees like stamp duty and the estate agents’ and solicitors’ fees. So, there are no hidden costs or expensive surprises. You just walk into your fully furnished bungalow and make yourself at home.
Each bungalow has either two or three bedrooms and is fully furnished with top-of-the-line appliances They have private gardens and driveways and are situated in prime locations across the UK, often in picturesque countryside or near the coast with wonderful views. The homes start at £149,950 rising up to £550,000.
The RoyaleLife Home Part Exchange is the smarter way to greater financial security for many people: it carries a lower financial risk without the worry of a massive repayment hanging over your head.
Instead, you get a luxury bungalow that is brand new and all yours. On top of that, you will have cash on hand to do those things you’ve been waiting to do during your retirement. Go ahead, take that holiday. Buy that new car – you’ve worked hard – you deserve it!