It is tempting to get an equity release loan. It does not take much time to process the application. The design also targets seniors like you who do not have a stable income source. If you need to use the money now for whatever reason, these loans are perfect for you.
Before you get tempted to take a loan, you need to understand that you are going to secure it against your property. If you intend to give your property as inheritance to your children, you will not have that chance anymore.
In most cases, equity release companies will not require you to pay the loan back soon. However, once you die or leave the house to receive care elsewhere, the creditor has the right to sell the property. From the amount obtained from the sale, a significant portion will go to the repayment of the loan. Your beneficiaries might not receive anything considering the high-interest rates that come with these loans.
It does not mean though that you should not pursue your plans anymore. If you think the terms are fair enough and you need to borrow the money now, you can continue the transaction. Be sure that you are borrowing the exact amount that you need.
Do not go beyond 50 per cent
The first step is to ask a valuation officer to come over and determine the value of the property. From the indicated amount, you can decide how much you are going to borrow. The usual range is 30-50% of the total value. It is best for you to not go beyond 50%. It ensures that half the sale value will go to your loved ones, and the creditor can only touch the other half.
Be practical
You also need to determine why you are going to borrow the money in the first place. If you are spending it on something insignificant, and you do not need that big of an amount, you do not need to get equity release. You can find other loan options that are suitable for you. Although you need to pay them before you die, you could still keep the property intact. It does not mean though that you cannot use the money to travel the world or buy an expensive item for your home. As long as you think the money will go to the right place and it will make you happy, you can pursue it.
Consult with your children
If you are unsure about this decision, you can talk to your children first. They might give you other options instead of equity release. If they can provide you with the amount that you need, you do not need to take equity release. You can also talk to equity release advisers since they know a lot about this type of loan. They will give you the pros and cons of each choice.
There is nothing wrong with pursuing a loan if you will benefit from it, and it will not take the entire property’s value away from the people you love.
To read more on topics like this, check out the lifestyle category.