Who Is Your Enemy? Equity Release Companies to Avoid
The equity release mortgage market in the UK is a very competitive industry. There are many companies to choose from, and it can be difficult for the average person to know which company they should go with. This article will explain how you can avoid some of the most common Equity Release Companies To Avoid so that you can make an informed decision about your financial future.
Considering Equity Release?
Opt for a fixed interest rate: Some companies offer equity release products with variable rates. Interest rates can change at any time. This is one of the Equity Release Companies To Avoid because it will jeopardise your mortgage payment. Fixed-rate mortgages are much more predictable, so you’ll know exactly how much you’re going to be paying each month.
If possible, choose an early redemption product: With an early redemption product from most providers, you have up to ten years before the terms of the loan kick in – which means that if something happens like having a medical emergency or losing your job, then you could get out of debt without too many penalties (if any). On the other hand, suppose they don’t provide these types of options available. In that case, another option’s important to do your research so you can avoid Equity Release Companies To Avoid.
What Should You Know About the Types of Equity Release?
You know that there are various equity release products out there, and it’s important to do your research to find the one that is right for you.
An Equity Release (also called “Home Reversion”) could be an excellent solution if you’re finding yourself in need of money but don’t want or can’t sell your home; then this might be something worth considering.
There are two types:
The first type is an ongoing, lifetime mortgage product where monthly payments are taken from their pension pot until they die – this means that as long as they have enough funds each month, the lenders will take these monies when required by law and pay off the outstanding mortgage.
The second type is a one-off lump sum payment which is taken in full from their pension pot – this means that if they have enough funds to cover the cost of their house and any other debts, then the lenders will take these monies when required by law and pay off the outstanding mortgage as well as all other debts.
It’s most likely going to be an ongoing monthly product for those who want it until they die. Still, some may prefer not having anything left over after retirement opts for a one-off lump sum payment instead. Ultimately, you can either take out an equity release plan or continue paying your regular repayments on your mortgage, whatever option suits you best!
The Benefits & Drawbacks
The benefits of equity release include:
- Keeping your home.
- Making the property fully yours.
- Protecting it from inheritance tax.
You can even sell the house before taking on an equity release plan if you wanted to, which is something that’s not possible with a mortgage repayment scheme.
With regards to drawbacks, people who are still working may be at risk of losing their job due to spending so much time finding cash for repayments, or they may find themselves unable to manage their finances as well when they get older – this means that there could be more potential problems in terms of paying off debt! Therefore, it’s really important for those looking into retirement solutions such as these products to do some research first and speak with a financial advisor about what would be the best solution for their own needs.
It is important to know what you want your plan to achieve before choosing one because they all have different features and are designed with slightly different goals in mind.
Is Equity Release Safe?
Equity Release is not for everyone; it might be a product of last resort. In addition, equity release schemes are very complicated and can be dangerous if you don’t have the right information to decide about your retirement future.
It’s important that anyone looking into equity release gets all the facts first and does their research before even considering one of these products because they are complex, expensive, and risky in some cases – so it’s worth finding out as much info as possible! When choosing this type of scheme or any financial product, the most important thing is to know what you want from them because there are lots available with different features designed for slightly different goals. You should find out which would suit your needs best before comparing them and choosing the one that works best for your situation.
It’s also really important not to rush into a decision because it can make things worse later on when you may need this money, so always take plenty of time before making any decisions. Be aware that equity release is going to have an impact on your quality of life in retirement, too. There will be fewer freedoms and less access to funds which could potentially cause difficulties with day-to-day living costs like transport or eating out at some point. You should ask yourself whether you are willing and able (physically) to manage these potential limitations and if they would outweigh what other financial benefits might come from doing this type of deal.
Learn More: Is Equity Release Safe?
What Are the Interest Rates?
Interest rates will vary depending on the type of deal you are looking at and can be from as low as one per cent up to 12%. The effective interest rate is also dependent on how long you would like your loan for – longer loans mean a higher monthly cost. For example, taking out £100,000 over ten years with an interest rate of five per cent could end up costing around £225 per month. But if that same amount was taken out over twenty years with an interest loss of just two per cent, then it would only come to about £97 per month, which could represent a saving in both total costs and stress levels.
You should always think carefully about the impact before making any decisions because equity release can have some unforeseen consequences.
The equity release companies to avoid will be those who refuse to offer a fee-free consultation or have high upfront costs. They may also charge for setting up an appointment with one of their advisors. Suppose you want the loan to cover living expenses. In that case, they could even make it conditional on taking out life insurance too. , The Financial Conduct Authority does not regulate some, so this is something else that needs consideration before signing any agreements.
Don’t get scammed into thinking that you’re doing yourself a favour when in fact, all you’re doing is paying more money – never sign anything without reading and understanding what it does first. It’s always best to speak with independent experts about your options instead of going direct to these firms as well because this way, you know you’re getting impartial advice.
Finally, if someone approaches you out of the blue offering an Equity Release Loan as a way to release equity from your property, and it sounds too good to be true – then it probably is!!
Top 5 Equity Release Companies
Aviva offers Interest-Only mortgages, where you only make payments on your mortgage interest for up to five years.
You can repay as much or as little of this at any time during these five years and even have a lump sum payment once all the interest has been paid off.
This product is aimed at those who want some flexibility in their monthly outgoings but still need certainty that they will pay off their home loan at the end of it – an option which many lenders don’t offer in today’s unpredictable economic climate.
Eligibility: You must be aged 60 or over and your home worth less than £250,000 to apply for this product.
This equity release product is for homeowners aged 55+ with a mortgage worth £250,000 or less.
It gives you the flexibility to take out 35% of your home’s value as a cash lump sum payment and then give yourself up to 12 years to repay it at an interest rate that starts from just over 0%.
The remaining part of the loan continues in line with your original terms – thus giving you more security than Interest-Only mortgages if rates go up significantly over the next few years.
Eligibility: You must be aged 60 or over and have had your current mortgage account open before 29th September 2003 (or any date between that time and when the duration limits on mortgages were removed).
Just retirement is a specialist equity release provider with more than 30 years of experience providing products specifically for homeowners aged 55+.
They offer three different types of Equity Release: Home Income Plan, Interest-Only and Lifetime Mortgage. All their plans are available to borrowers aged 60+ who own property worth up to £250,000 (£350,000 in London) and have been on the same mortgage since before 29th September 2003 (or any date between that time when duration limits were removed).
Just retirement also provides an interest rate pledge which guarantees you’ll never pay over 0% APR once your original term has finished.
Eligibility: You must be 65 or older with at least one year left until retirement and thinking about how you will fund your retirement.
You must be a homeowner and live in England or Wales, excluding Northern Ireland.
LV (Liverpool Victoria)
Liverpool Victoria offers two types of equity release plans: the Lifetime Mortgage and the Interest-Only mortgage.
The LV Lifetime Mortgage is their flagship product, which provides a guaranteed income for life or until you die as long as you are still living in your property at that time.
With an interest-only plan, customers can access up to £100,000 when they need it with no penalties on what remains outstanding, so there’s no risk over repayment.
LV also offer other mortgages such as fixed rate deals and tracker rates across varying terms from three months to 25 years.
Eligibility: You must be 65 or older with enough assets (savings) outside of pension schemes to support your lifestyle during retirement; this includes all savings held within a bank or building society account, the value of any property you own, which is not your home and all other possessions.
Legal & General
Legal & General offers a range of Equity Release Plans, including interest Only, Lifetime Mortgages and Lifestyle mortgages.
Legal & General has been providing equity release products for over 30 years to approximately 26,000 customers nationwide.
Interest-Only provides up to £100 000 with no penalties on what remains outstanding, so there’s no risk over repayment.
How Do I Know if an Equity Company Is a Scam?
Be wary of any equity company that offers a high percentage rate.
Always make sure you’ve checked their credentials with the Financial Conduct Authority (FCA) and FOS.
What Are the Red Flags That Indicate a Company Is Not Legit?
A company will send you a quote without asking your permission to do so.
The price is too good to be true, or the offer seems suspicious.
There are no FOS complaints about this company on their website’s customer feedback page.
How Do I Choose the Right Equity Company?
Do your research. Ensure the company is regulated by the FCA and has FOS complaints available on their website or a legitimate number you can call to speak with someone directly.
What Are the Equity Release Companies I Should Avoid?
The company promotes itself as an “independent equity release provider. Unfortunately, you can only get in touch with them by email or phone, and they won’t give you their address.
Their website is vague, doesn’t provide any information, and has no links to FCA registration details for your peace of mind.
There are a lot of equity release companies out there that will try to take advantage of you. Therefore, it’s important for consumers to research and learn about what they offer, as well as their reputation with the Better Business Bureau, before signing up.