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Equity Release

Household Finances Could Fall to 2005 Levels

If you were wondering what the true impact is of the current economic crisis and austerity measures, we now have a much clearer picture on how the finances of many families are suffering in real terms. It has been revealed that family finances are likely to equate to the levels we had as far back as 2005 – that is a fall back to levels 9 years ago. The recession is over, but there are still struggles as the economy slowly gains momentum. For retirees it is time to think about equity release and if it makes sense to take out this product to help stimulate the economy and live an easier retirement.

Salaries and Cash Flow
The reasons behind this are mainly due to the fact that salaries are either rising at pathetic rates, or for the most part, are actually continuing to fall when more and more companies are struggling to keep their heads above water during these hard times. You also need to bear in mind that taxes and cut-backs are paying a weighty toll on family incomes.

Cash flow is still not as stimulating to the economy as it was prior to the two recessions. In fact there is a larger emphasis on saving money right now. It is the first time in more than a dozen years that saving money has been important. When you consider the troubles the economy is facing right now and consider your retirement you may be worried.

If you are on the eve of retirement age such as 65, still have a mortgage, and worry your pension is not going to cover expenses consider your options.

Retirement Funding Choices
As a person heading in to retirement, you could hold out a few more years to try and save a little more towards your pension. Many also consider retiring, but hiring on in a part time position. Part time jobs are difficult right now though so you might not be able to find something you could enjoy as a partial retirement.

Another choice is to sell what you own by downsizing into another home, fewer cars, and other things you have. You could start to live a moderate life with few entertainment options. You may not be able to take those holidays you waited for given your pension and retirement funds, but you could live comfortably.

Your other option and one that continues to gain notice is releasing funds from your home to live on. With this in mind, it is no wonder that people are looking to measures such as equity release plans to tide them over. We all hope for better years in the future and the mentality seems to be that we need to do all that we can to protect our way-of-life and ensure that our family does not suffer too much. These plans release cash from your home turning your cash poor situation into one that is comfortable. Of course you need to be property rich in terms of having enough equity to make this concept plausible.

Home reversion and lifetime mortgage choices help you gain equity from your home to live on comfortably. You can still downsize and maintain a modest life, but you also have rainy day or holiday funds. With plenty of benefits such as tax free cash, using it as you want, and helping family it can be the perfect solution.

There are disadvantages to these plans, of course, but you can also benefit. It is a choice of what is right for you and how you want your retirement to be like when the job situation is not looking so great. The whole point is that you might be able to hold on and not retire versus not using equity. If the economy and employers won’t sustain this option then you have to look for alternatives.

The Shocking News and your way around it
This shocking statistic is definite evidence of the fact that the austerity measures implemented by the Government are hitting every household much harder than was originally forecast. Many people were opposed to such a stringent programme being introduced to take care of the debt the country is in; they favoured a longer-term and far less painful plan.

This is all a catch 22 situation at the moment. Many people are so grateful to still have their role of employment at the moment that they would not dare to rock the boat, so to speak. It would appear that employers are fully switched into this mentality and for the most part, are taking full advantage of this. So you could take advantage of equity release and retire on time.

Equity Release

The Most Popular Lifetime Mortgage Scheme

Features of lifetime mortgages have evolved over the recent past and a lot of changes have taken place. Equity release schemes provide a number of benefits that enable you to take advantage of your home value. An example is the ability to repay the mortgage without fear of penalty payments. Another is the option of saving a portion of your home without selling it or using the equity in it to provide an inheritance. Other schemes like the drawdown lifetime mortgage offer you away to take out only the money you need and the ability to take more later should your needs increase.

The drawdown lifetime mortgage is the most popular type of equity release scheme in 2012. This is due to the flexibility of the schemes as funds can be taken on a drip basis from an overall reserve facility. What normally happens is that interest is calculated on the basis of the initial amount borrowed and it compounds as time goes by. Therefore, if a huge lump sum is taken from the beginning, interest charges will be high and will remain on the upward scale.

The drawdown plan has a host of benefits in lifetime mortgage but the most significant one is that they provide a pre-contract agreement whereby a limit is put on charges according to the value of your property. In most equity release plans the lender comes up with the amount to be deducted from the start, and normally it is somewhere around £10,000 and £25,000. The drawdown balance is available for the duration of the term, but terms are subject to change if the market changes.

Today there are so many lenders in different forms who have come up with customised terms in order to lure clients. The borrower of the mortgage must be clear with the terms beforehand because if there is one tricky field in financing, it has to be mortgage and loans. People often get themselves in situations they can barely get out of, which can give you a lot of headaches.

When you have a lot of information it can be best to look at a list of advantages and disadvantages. You also have to realise that drawdown lifetime mortgage plans can vary from provider to provider thus this generalised information can improve upon speaking with an agent or turn you off the idea altogether. It depends on who you speak with and how many agents you speak with. Always get three opinions when it comes to your financial planning regarding your retirement and lifetime mortgages.

Advantages of Drawdown Mortgages
1. You can be 55 and apply for this mortgage.
2. You can decide how much you withdraw on a monthly, quarterly, or annual basis. Typically the provider will require an initial lump sum at a certain amount, then you can take as much or as little as you want from the account. Obviously you cannot take more than the account has available.
3. Every 3 to 5 years you may need to reassess your drawdown mortgage to see if you should increase the amount of equity you use. This is an option with most providers.
4. The cash you receive is tax free.
5. You can use the cash as you wish for expenses, house repairs, emergencies, holidays or other special things you wish in your retirement.
6. You do not pay interest or any principle balance until the end of your life or you move to a care facility.
7. You only pay interest on the amount of money you withdrew from the account, not the funds available to you in the account.

Disadvantages of Drawdown
1. Drawdown lifetime mortgage is a mortgage.
2. You will owe money at the end of the mortgage including any interest that has accrued.
3. Most providers require the house to be sold within 12 months for their repayment or immediate repayment if your beneficiaries do not wish to sell the home.
4. It can be difficult to leave an inheritance behind if the housing value drops into negative equity.
One important clause to write in your contract is a negative equity clause. The clause should state you or your beneficiaries are not liable if your home is in negative equity at the time of your death or removal to a care facility.

To be safe with your lifetime mortgage plan, shop around for the most suitable choice. You can gather information from the internet or try to seek professional advice from a mortgage expert. This will save you a lot of headaches after your retirement.