Avoid the pitfalls of equity release

Equity release schemes have gained popularity in recent years as people have come to realise that they can release cash from their properties to boost their weekly income.

Sadly, it is mostly vulnerable and cash-strapped pensioners who fall victim to these schemes. Equity release companies sell retired people a lifestyle dream under false pretences, while the reality is in stark contrast. Instead of living the dream, these equity release schemes often turn pensioners’ lives into a financial nightmare which haunts them for the rest of their lives.

What is equity release?

There are many different equity release schemes, all based on the same concept. The agreement is that you receive the loan as cash, usually on a monthly basis, but sometimes as a lump sum, and continue to live in your home.

Then the company that loans you the money will recover it either by selling your property after your death, or when you sell your property.

To be eligible for most schemes you should be aged 55-70, have a property that is worth at least £30-40,000, and ideally be a freeholder.

What are the pitfalls?

For many older people the chance of unlocking some of the cash tied up in their homes is the ideal way of solving money worries. However, what may seem as an ideal solution today, could leave pensioners even worse off tomorrow.

Common pitfalls include:

• Fees:
  Applicants will potentially be spending hundreds, or even thousands, of pounds in application fees, valuation fees and legal fees. Most equity release schemes also carry heavy penalties for early redemption, which could amount to thousands of pounds.
• Interest:
  Equity release schemesare effectively lending money at fixed rates that are way above mortgage rates. Furthermore, the interest adds up - if you borrow £100,000 at 7.79% per annum, at the end of the first year you would owe £107,790, and at the end of year two the 7.79% is applied to £107,790, and so on over the years.
• Slower or no property growth:
  People who take out equity release schemes and end up living a long time, could very well lose all their assets. In other words, should house prices stay pretty much the same, but interest continues to add up, in 15 to 20 years there could be nothing left after the debt is repaid. For example, if the £100,000 is paid back after 19 years, with interest it will balloon to £415,000. If the house is still worth £400,000 in 19 years there will be nothing left after the debt is repaid.

Turn to financially smart solutions from MPG

Make the smart choice and stay away from harmful equity release schemes that could have you locked into a risky agreement for years to come. Simply sell your home to MPG Investments, and we’ll give you cash for your property within one week. There are no risky contracts involved, no commission fees or hidden costs, and once the deal has been finalised, the cash is yours to enjoy – however you like!

What’s even better, you can continue living in your home, even after you’ve sold it to us, if you opt to take advantage of our innovative Sell and Rent Back solution.

Contact MPG Investments today on 0800 634 9231 to find out more about how you can avoid the pitfalls of equity release schemes.