Equity Release Versus the Halifax Retirement Home Plan – And the Winner Is?

Confusion reigns at a time in life when stability, financial security & freedom to enjoy the fruits of one’s success should be evident. Yes, we are talking retirement, equity release & the increasingly popular Halifax Retirement Home Plan.

Here we discuss the options available to those already retired or the up & coming baby boomer generation, as they prepare to assess how they are to manage in today’s financial maelstrom.

For many, & usually it all boils down to lack of financial planning in earlier life; retirement is none of the aforementioned attributes associated with the longest holiday of your life.

We all go through life thinking retirement seems a distance over the horizon. From getting that first job, raising the children & moving up the ranks in the employment world, our lives move forward apace.

But the inevitable will reach us all one day & without foresight retirement could be the biggest challenge in your lifestyle thus far.

So how should we prepare & how do we invest in our futures to ensure a retirement of fulfilment?

The spoken word, ‘hope for the best, prepare for the worst’ must have a ring of truth when it comes to retirement planning. It’s a recipe on the menu that’s always put on the back burner & one on the ‘to-do’ list of things that can wait until tomorrow… YOU CAN’T.

Looking back at that first job is where the seeds should initially be sown. Whether it’s joining that company pension scheme or making your own provision, a pension should be the life jacket for your retirement.

The old adage of the earlier you start a pension the less you need to pay in later is gospel & with the tax advantages on offer they still represent one of the best ways to build a pot of gold for the future.

But there are other options now available which represent a safer alternative & more hands on approach such as real estate.

The buy to let market is currently undergoing transformation in the current economic climate, with rental incomes outstripping savers returns on bank & building society accounts. There is also the potential capital appreciation aspect of owning a property which has been a tried & tested route for many over the longer term.

Property is a tangible asset; you have control over how it looks, you can manipulate it & affect its value. The sole aim of these actions is to build asset value & thereby probably without hindsight, can build yourself a ‘retirement vehicle’.

So let’s see which vehicle will suit your requirements & enable you to navigate down the retirement highway…

Firstly, the question that needs to be asked is whether an income or capital lump sum is required? Given the fact that most tax free cash requirements are for capital, the options are then narrowed down to affordability in retirement.

The next important consideration is whether one can support the monthly payments of an interest only mortgage, or are finances so tight that no further monthly payments are required throughout retirement. The answer to this will filter us towards the ultimate decision; that is whether the solution is an interest only lifetime mortgage or a roll-up equity release scheme?

On the one hand you have an interest only mortgage, where monthly payments are required to be maintained for the rest of your life & results in a continuously stable & level balance during the remaining term.

This is in complete contrast to a roll-up equity release plan, which requires no monthly payments whatsoever, but allows the interest to compound & the balance of the mortgage to get larger.

Let’s have a look the features of each option further.

Making Use of an Online Equity Release Calculator

For householders, one notable financial stream that may be leveraged through the use of an equity release calculator is the money that stacks up as equity in their home. Essentially equity is the value of a home based upon the present value, minus the rest of what the house owner owes on the mortgage in total. When a property value appreciates, equity within the home additionally rises, as long as you haven’t topped up the mortgage! For several, property values have risen considerably throughout the last thirty years and by releasing equity this may be a helpful supplement to poor acting pensions.

So, however might equity release be used and which way are you able to establish what’s available?

For individuals seeking to get into this monetary resource, there are a variety of choices on the market. As an example, equity release might permit you to get your hands on a stream of financial gain that you may otherwise not have had. This is through staged drawdowns or through one giant payment based mostly upon the equity in your home. Several people have used this as a funding choice for alternative assets, like holiday home purchase, or to pay their daily expenses to keep up their living standards. Initially though, they ought to see what equity choices are on the market to them and compare the offerings. Usually owners can use equity scheme lenders which can facilitate the dealing and ultimately handle the capital outlay. Some have additionally cited this as a ‘home reversion’ or a lifetime mortgage, and also the target demographic for these styles of funding choices is often seniors, aged over fifty-five.

Once options for the release of equity have been compared, the calculator may be a valuable tool that may permit you to calculate what quantity of equity is obtainable for release from your property. Again, there are a number of variables that come in to calculating this figure however most can usually be based upon the property’s prevailing value, your age and state of general health. By utilising these tools you’ll be able to then use the knowledge gained to arrange something that is set up to meet your needs. There are many equity release calculators on the market which are able to offer you an immediate figure to think about.

In order to use an equity release calculator and perform a good home equity release comparison, you may have to establish the present value of your property and ascertain what proportion of cash is owed on your mortgage. When you’re not already clear regarding your homes worth, we would advise you to meet with an area agent. Also to keep a watch on recent localised sales of comparable properties. Ultimately you should have the house valued by knowledgeable appraiser, typically appointed by the investor.