You have probably heard a lot about how equity release works, who it is intended for, the different options available and the equity release pros and cons. But how do the economic conditions affect these equity release schemes and how do we know which one to choose? You must know the facts before choosing.
Before you know which equity release to choose, it is important to know that equity release rates are affected by long term interest rates and not residential mortgage rates. A common misconception is that equity release is a bad decision because the rates are higher than those of normal mortgages. But you need to know that mortgage rates change as the bank changes its base rate and equity release scheme rates remain FIXED for the duration of the loan period.
So, taking into consideration the effect of the interest rate on equity release schemes, what options do you have? The most popular form of equity release is the lifetime mortgage. A lifetime mortgage is a loan taken out on the value of your home and then received as a tax free lump sum or monthly payments. The interest rate is fixed for the loan period, but compound interest gets added to the balance. (more...)