What Are The Typical Costs to Set Up an Equity Release Mortgage?

For many people, an equity release mortgage is a good solution to cash flow issues later in life. This kind of financial scheme allows you to stake your valuable assets – such as your property – to secure a loan, and to retain use of these in your everyday life as well. It is a financial scheme with a lot of legal jargon and concerns. Before taking out an equity release mortgage you want to make sure you have a solicitor in your corner. Solicitors who are members of ERSA should be compared to find the one that will be most helpful to you.

There are several varieties of equity release schemes; some involve simply taking out a loan, while in others, the third party actually buys your property from you and delivers payments in small chunks that are deposited monthly and which become your regular income.

If you are keen to take on this kind of scheme, you will want to ensure that you have plenty of advice and support in order to make sure that you avoid hidden costs and get the best possible deal. Solicitors who are members of ERSA will be able to help you here.
This kind of legal professional specialises in equity release law. As a result, he or she will be able to point out all the costs to you, and to assess your situation accurately in order to recommend the best product for your requirements.

Exploring Equity Release Schemes for Costs
Your first decision will need to be what type of equity release scheme fits your needs. Without an understanding of the products available it will be difficult to discuss the costs you may incur.

You have home reversion which is not a mortgage but a sale of your home. You must own your home in full and be 65 years of age. You sell the entire home or just a portion of it as a means of getting money for your retirement. There are no repayments necessary in this scheme and no interest to accrue. This is because the money is yours for the sale. Home reversion is a tax free option; therefore, you do not need to worry about capital gains tax from the home sale. However, there are solicitor fees, provider fees, underwriting fees, and closing costs associated with home reversion plans.

Lifetime mortgages are provided in four different products in the UK. The market can change and products have been known to come and go. Right now you have roll-up, drawdown, interest-only, and enhanced lifetime mortgages available to you. Each has its own unique options for payments, repayments and compounding interest which can determine some of the fees you will see.

First lifetime mortgages are loans. You will see closing costs, underwriting fees, provider fees, and solicitor fees. These costs are generally required upfront; however, select providers will include the fees into your loan for repayment later or at the end of your mortgage term. Interest-only lifetime mortgage is the only loan in which you can make monthly payments, reducing the amount owed at the end of the mortgage agreement. The end of the agreement is usually at your death or on the sale of your home when you decide to move into a nursing home or other care facility.

Like home reversion, lifetime mortgages offer tax free money when you take out the loan. This saves you from capital gains taxes whether you use a lump sum or drawdown scheme in which you take money as you need it.

Hidden fees have been known to be applied by some providers that are less than reputable. It is imperative that you look for a member of the SHIP (Safe Home Income Plans) programme. Members of this organisation are highly regulated.

Additionally you want a negative equity clause in your equity release mortgage contract. This will help your beneficiaries and family avoid unforeseen charges. Home values change, sometimes lowering. They could lower enough on your home that even with the sale your home does not pay the entire lifetime mortgage amount with interest. A negative equity clause ensures your family does not have to pay the difference. It is a good idea to speak with your family before you enter into an agreement too.

Equity release schemes are useful; however, they can also be fraught with hidden expenses. In order to help you to make sure that you navigate these successfully, it is a good idea to hire legal professionals such as solicitors who are members of ERSA with specialist knowledge of this field.

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