Which Equity Release Schemes are best for early repayment charges?

Which Equity Release Schemes are best for early repayment charges?

If you are approaching retirement and you have no immediate plans to head into long-term care, the chances are good that you may be interested in releasing equity from your assets. Lifetime mortgages or home reversion policies are considered good options during your later years; however, before you make any solid decisions, you will want to do plenty of research.

To begin with, it is important to thoroughly understand what an equity release policy entails. Simply put, this kind of mortgage allows you to access the capital that is tied up in your property, while at the same time retaining occupancy of your home.

This kind of scheme is designed to run for the length of your life. This means that it has no fixed term; once the borrower is deceased, the loan taken out and the interest accumulated on it are both repaid by the sale of property. Any remaining balance is passed on to the estate.

If, however, the equity release scheme is forced to close within a certain period after it has been taken out, the borrower will be required to meet a mandatory early repayment charge. This additional sum of money can be fairly large, and so, if you are considering equity release as a possibility, you will want to make sure that you choose a policy that will not bankrupt you or your estate if you need to bring the scheme to an early close.

While equity release is a useful tool for supplementing your pension fund, it is not without hidden costs and pitfalls. Anyone considering taking out a lifetime mortgage or engaging in a home reversion scheme will want to be sure to read all of the fine print on the proposed contract: you might just find that the early repayment charge is crippling.

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