Equity release has received a lot of attention this year. It is becoming a popular way to finance retirement, not to mention free up some cash for other things as well.
However it is important that you understand the process behind equity release before considering this as a way forward for you financially. One area that many people wish to know about is how this type of funding works if you have a mortgage. Here we aim to set the record straight so you know where you stand if you still have anything outstanding on your mortgage.
Is equity release open to those who have mortgage payments outstanding?
Yes and no. It is a condition of this type of financial product that you do not have a mortgage remaining on your property at the time you sign up to equity release. So you can either wait until your mortgage is fully paid off or find the funds elsewhere so you can bring the mortgage to a close.
However we did state the answer to the question was ‘yes and no’. This is because you can be accepted for equity release with an existing mortgage if you agree to use some of the funds you release to clear the mortgage in full. If you choose this route this will be one of the conditions you need to meet in order to be accepted.
Is it advisable to get professional independent advice prior to doing this?
Yes, although this does apply to any financial decision you may make. Not all products available in this marketplace are exactly the same. Seeking proper advice can help you to ascertain which provider would be best for you. It will also help you to understand whether paying off your mortgage to enable you to release the equity in your home would be a good move in your case.
If the mortgage is paid, what limits are there on using the rest of the equity released?
There are no limits on what you can use the money for beyond this point. Of course you should consider how much cash you will need and whether or not it is wise to take out the maximum amount you can have.
As you can see, careful planning is required if you wish to determine whether equity release is ideal for your requirements. It may be that you are considering this as an option for the future. If this is the case you should assess how much is left on your mortgage and consider whether you can pay it off by other means prior to opting for equity release. A lot may depend on how close you are to reaching the end of the mortgage term.
Once you have all the required information to go on, you can make an educated decision on whether equity release is for you – regardless of whether you have any further payments to make on your mortgage at present or not.