Conventional equity release schemes vs MPG’s Sell and Rent Back

Equity release schemes, in their many shapes and sizes, have become increasingly popular among UK homeowners over the past 10 years.

Essentially, they are all types of mortgage loans, which generally allow older homeowners to cash in on the value of their properties – often to cater for their daily living costs – while they continue to live in their homes. Lenders retrieve their money in one of two ways: Either, they sell your home after your death, or you sell your home once you are ready to move into a care home, for example. Upon entering into an equity release agreement, however, forfeiting the ownership of your property – either partially or fully – becomes a reality.

The market is saturated with endless equity release options. It is thus vital to do careful research before making a decision to avoid the possibility of being taken advantage of and left with debt in your old age. The prospects of being left destitute and penniless at this time of life are dismal to say the least.

This article will illustrate that many equity release schemes, while promising easy and quick solutions to your every financial concern, often leave homeowners disappointed and burdened with debt.

MPG Investments, London’s premier home buying company, proudly offers Sell and Rent Back: an affordable and sustainable property solution. Read on to find out more about the safest and fastest way to release equity in your home – without having to move!

Pitfalls of traditional equity release schemes

An equity release scheme can come in the form of a ‘second mortgage’, ‘home equity mortgage’, ‘home equity loan’, or ‘home reversion plan’ – these are different concepts that essentially describe the same thing, save a few minor differences. Some of these are discussed below:

A home reversion loan is made when a company purchases a share of your home and then keeps its percentage of the total profit once your property is sold. With a home income plan, you receive a mortgage on your home’s value, which you can use to purchase a “lifetime income” – monthly interest instalments are subtracted from this income, and the initial mortgage loan is repaid when the house is eventually sold. As the name implies, interest-only mortgages only require the payment of interest on a monthly basis – a lump sum loan is granted up front and this money is repaid using the proceeds of the home’s future sale. Finally, a lifetime mortgage allows homeowners to borrow a lump sum, or monthly instalments, based on the value of their homes, and then to repay this money as well as the cumulative interest only once the house has been sold.

Too many homeowners have learnt the hard way that re-mortgaging your house can be an expensive, risky and inflexible exercise. The biggest disadvantage, perhaps, is the exorbitant interest rate that lenders expect as a condition of second mortgage loans. Ironically, the chief reason why most homeowners opt for an equity release scheme in the first place is to address their unfavourable financial situation.

Furthermore, some unscrupulous mortgage loan companies exploit homeowners – especially those desperate for fast solutions – with their lack of honesty and transparency. It is often the case that these companies do not educate their customers about the risks involved, and their loan offers are frequently much lower than is warranted by the property’s value.

Homeowners who are considering equity release schemes should ideally be between the ages of 55 and 70, and their property should be worth £30 000 or more. Furthermore, homeowners should be aware of unforeseen events and possible risks that could come into play.

Firstly, equity release schemes can forfeit a large portion of a property’s value due to the repayment of loans and the interest involved – this is especially true for owners who inherited their homes. Consider the following example: if a homeowner releases £80 000 on a house that is worth £350 000, the outstanding amount could escalate to £256 570 in as little as 20 years.

Also bear in mind that equity release schemes could ruin your chances of qualifying for means-tested benefits or assistance with care home payments later in your life. This is a potential disadvantage, as pension credit and the Minimum Income Guarantee is increasing in value.

There are several other important issues to be aware of if you are considering an equity release scheme. You need to establish whether the scheme will allow you to move house if that becomes necessary. This is particularly pertinent in the case of elderly homeowners who may need to relocate closer to their families or move into an old age home.

Secondly, you should consider your age – if you are older than 80, the chances are that you will pass away before being able to reap the full benefits of the monthly instalments that such schemes allow. In addition, you should know that most equity release plans are based on the condition that the lender will sell your home to cover your debt after you die – this means that your family will not be able to inherit your home. Lastly, if you live with a younger person, they will have to move in the event of your death.

A fast home sale is better than risky equity release schemes

Thanks to MPG Investments’ fast and safe Sell and Rent Back solution, you can release equity from home by selling it in a matter of days! Better yet, you do not have to deal with the stress of finding alternative accommodation and moving house – you can rent your own home back from us at an affordable rate. There are no monthly interest payments or other hidden expenses to worry about.

Celebrated for our transparent business ethic, we ensure that every step of your selling process – and all your costs – are disclosed and explained at the commencement of our relationship.

If you contact one of our expert consultants today, we will make an appointment to valuate your home within 24 hours. If you are happy to proceed, we are primed to present you with a guaranteed cash offer for your home within 48 hours.

Retirement ought to be a time of relaxation, recreation and quiet reflection. Contact us today for sustainable solutions and ultimate peace of mind on
0800 634 9231.