Thursday, 22nd February 2018
FINANCE & INVESTMENT Article
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Equity release: which is the right one for you?

Equity release: which is the right one for you?

Equity release plans allow you a great way of freeing up some of the cash tied up in your home. They can give immediate access to a tax free lump sum and at the same time, pay a regular monthly income. These schemes can solve many of your money worries and make your life far more enjoyable.

However, in today’s uncertain financial climate it can be difficult to decide which scheme to use or whether you should use any of the schemes at all. In the United Kingdom there are more than 40 plans available and over 300,000 people took out equity release plans during 2003.  All of these schemes have different terms and conditions and pay out different amounts.
To many people it may seem to be the answer to all their problems but before entering into any of the schemes on offer you should look at any other options you may have.

Once you have decided to proceed with an equity release plan it is essential that you consider all aspects as to how such a plan will affect you and your family. In certain cases it may mean that you will not leave as much to your beneficiaries as you would have liked.
No one knows what may be around the corner and it is essential that you do not enter into an equity release scheme that is inflexible. Circumstances change, and the scheme should be able to adapt to these changing circumstances.

It would seem that almost every day a new “equity release” scheme is released on the “Costas” but very few actually allow the property owner direct access to the release of cash. Again, most of these schemes are not available to individuals who already have an existing mortgage or charge against their property.


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I am aware of a number of schemes, but would only recommend two both for differing reasons; the first is available to individuals owning Spanish property with a value exceeding €350,000. The lender is willing to advance funds of up to 100% of property value and up to 25% of this can be released to the owners for whatever purpose they require. The remainder is used to create an investment portfolio from which a regular income can be drawn.

No capital repayments are to be made but the interest arising on the loan must be paid out of the income produced within the investment portfolio.

The second of the schemes is designed for high net wealth individuals or companies, who own property in Spain and wish to release capital from their property to increase their overall wealth. Loans of up to 100% of property values are available and a proportion will be released and may be invested into any project or investment vehicle that the owner decides. The balance is used to create an investment portfolio designed to meet the property owner’s requirements which could be for capital growth or to produce additional income.

Before entering into any such scheme make sure that all the terms and conditions attached to the loan and the investment portfolio have been explained and fully understood. Don’t rush into a scheme because it promises large or exceptional returns use common sense and seek advice from your accountant or professional advisor.

Graydon & Associates would be happy to give advice if you are considering using such a scheme.



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