Drawdown for a better retirement
/> As the over 55's equity release market moves closer to the mainstream market, innovation, along with many new providers now means that equity release plans are becoming available for use throughout your lifetime.Traditionally, equity release was often considered a 'one-off' transaction. Today it has evolved into a financial product which can be utilised in a more strategic way, allowing you to drawdown additional cash, as and when required, from a pre-arranged Cash Reserve. The typical 'Drawdown' Equity Release Plan allows you to take a relatively small initial lump sum of say £5,000 or £10,000. This is paid free of tax and can be spent as you wish. At the same time, a 'Cash Reserve' is set up, for an amount of your choice, subject to the provider's maximum. This is similar to an overdraft. You don't have to use it and most providers don't charge anything if you don't use it. You will usually have a telephone number to call to release funds direct to your bank. Some people use the reserve as a regular income, paid monthly or annually to boost their pension. Others use it ad hoc, for holidays, to replace the car or for emergencies. As the release of funds is spread over time they are far more cost effective than traditional schemes where one would release a large sum of money in one go, only to end up placing it in the Building Society to be eroded. No repayments of the amount borrowed are required during your lifetime. An interest rate, fixed for life, applies on the amount borrowed and the interest is simply added to the loan and repaid from the house sale after your death. Your home is still yours, and the contract ensures you have tenure for life and a guarantee that you will never have to pay a penny back during your lifetime, regardless of what happens to property prices or how long your life turns out to be! For those who want to guarantee they leave something behind, the 'Protected Equity' option also protects a fixed percentage of your house value as inheritance. As these plans are now under the protection of the Financial Services Authority as well as the industry body SHIP, they are also safer than ever. They can be used to pay off a mortgage, buy a new home, buy a home abroad or for any other legal purpose. You may not realise that if you already have an equity release plan, you may be able to switch it to a new scheme with another provider, releasing more capital in the process. For more information or a personalised illustration, without obligation, give us a call.