Equity release: good or bad idea?
In the 1980s, many people lost money after engaging in equity release schemes. Basically, they would borrow money from an investor and pay with the value of their house after they died or retired to long term care. At first, it seemed like a very good idea: getting money and not paying a penny for as long as you lived in your own home, and then giving it up when you no longer needed it. However, high interest rates and bad calculations on the side of the bowrrowers led to bad situations and many people started seeing equity release as a bad decision, a last resource at best.
However, a long time has passed since the 1980, and now, with stronger regulations and a more fierce competition among lenders, equity release has actually become a very good option to help for older people to stay in their homes while grabbing some extra cash from the value of their property. A recent assessment for older occupiers executed in Northern Ireland showed how a wide range of providers actually offered good deals to their clients, with reasonable interest rates, some of them flexible, voluntary repayment options and several guarantees so their borrowers would be – and feel – safer with their economical situation and even their inheritance in some cases.
Overall, equity release deals offer a good opportunity for elder people to improve their lives, pay debts, cover their expenses when on low fix income, increase the value of their property with home improvement, and/or any other thing they would want to do with that money.
Fix or flexible rates?
The difference between fix or flexible interest rates is a matter of economical context. Some people might prefer fix rates since they already know how much they’re going to pay, which helps them with their own financial planning. However, fix rates can backfire sometimes. In the 1990s and early 2000s, with house price inflation all over the place, fix interest rates were very beneficial for borrowers since the value of their home increased more than expected, so they were more likely to keep some value from the property to inherit to their children. However, the subsequent downfall in market prices had the complete opposite effect and they lost money.
Some measures were taken so equity release deals would be less dangerous for elder people’s financial balance. The FCA No Negative Equity Guarantee was a huge landmark in this. Basically, what this guarantee, offered by all reliable lenders, states is that no matter the fluctuations in house price over the years, and no matter the interest scheme taken, the total debt would never be superior to the value of the home, even if that means the debt should be cleared with a payment lower than expected, at the expense of the lender.
This guarantee is especially important in flexible rate plans, because it is much more difficult to predict how much the final total amount of money will be owed to the lender. With this extra safety guard, people can feel more free to take on flexible rates, which can adapt more to the fluctuation in market prices. Flexible rates rise and decrease with the general costs, so they remain more proportional to the actual value of the property. A good combination of flexible rates, a good quotation and a No Negative Equity Guarantee is the best plan any borrower could ask for.
The One Family Lite Plan
One Family is a mutual organization that provides several financial services to the community, including lifetime mortgages as well as other loans and financial schemes. What’s great about this organization, with about 2 million members, is that it offers eight different equity release schemes from where you can choose the one that is more convenient for you.
One Family offer lite lifetime mortgages, with the lowest minimum interest rate in the market, of only 2,96%. Other plans have different rates as well as specific terms that make them all unique. When consulting about the best plan for you, you should ask for information on all of them so you can find the one that is most convenient for your particular situation. You are sure to find something that fist your wishes perfectly.
It was a very strong move from One Family to offer such low minimum interest rate, in a flexible plan that is, of course, protected by the No Negative Equity Guarantee. When you choose One Family as your lender, you can rest assure to have the most convenient rates in the market, as well as a number of flexible options so you can find the best equity release plan for you.