UK equity release, also known as a self-certification loan is a lending practice in which a borrower secures a loan with a ‘charge card’ or other form of security and uses that charge card to pay off the loan. There are many advantages to this practice including those involving credit rating and personal credit history. This practice can have a high level of success with those wanting to release equity to relatives but it can be a poor choice for those wanting to release equity for personal reasons. For those looking to release equity as a result of an emergency, a UK equity release may be a good solution but only if it’s the best option available.
One of the most important factors to consider when looking at UK equity release is how long will it take to recoup the money borrowed. The longer you take out the loan the larger the amount you will be paying back against your equity in your home. It is usually recommended that home reversion investors take around three years to recoup their investment. For those wanting to release equity quickly to put cash in the bank or invest in a new home, shorter loan terms may prove more beneficial.
Another consideration is whether to pursue a negative equity guarantee or not. While this option may offer a better return at first glance, UK equity release advisers recommend against taking this option where the guarantee has an unsatisfactory term or period. For those wanting to recoup as quickly as possible, it is advisable to go ahead with the negative equity release but be sure to keep in mind the terms offered.
If you are in need of immediate capital to meet immediate requirements, a negative equity release market may be the answer but be sure to do your research and consider all aspects before making a final decision. Not everyone will find UK equity release markets to be the best options for their needs and many will find these options have disadvantages that outweigh any benefits. A long term care policy would be one example. This type of policy would help protect the equity in your home for the long term and allow you to have more funds to pay for your long term care costs.
Also consider any tax-free cash benefits offered when choosing the UK equity release market to pursue. While these savings can be significant, remember that the tax-free cash benefit will only start to become effective if you take out a loan for the same amount that you would with other options. Also keep in mind that interest will accrue on the tax-free cash savings that you receive and it would be at a higher rate than any other type of savings account. Be sure to use the UK equity release market to its full advantage. While some of these options may offer high returns, it would be wise to consider all of the pros and cons before investing your hard earned money in them.
Remember that every aspect of the UK equity release market has negative aspects and potential risks. Before making any investment decisions, you should do your research, consult with a financial advisor, and get a complimentary online UK equity release calculator to help determine which investments are right for you. You should use a reversion plan that allows you to take advantage of any tax-free savings, while still maintaining a reasonable level of income and debt. With proper planning and financial discipline, a homeowner could easily see their home value appreciates in five years or less.