Do you need to raise money against your home?

Are you under 55?

There is a currently a massive demand for equity release under 55.  Bank base rates are basically zero and could go negitive like in the eurozone, so you can borrow money very cheaply.

They can be used for:

  • Debt consolidation
  • Home improvements
  • Buy-To-Let deposits
  • Investment purposes

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For Equity Release Under 55 why are the rates so low?

The graph below shows the 10 year gilt yield over time.  As of today 16/03/2021 the government can borrow money for 10 years at 0.78%, which is a very low rate.  So if you have capital, lending it a bit above 0.78% you can make money.  Due to the strength of the UK residential property market, lenders including overseas lenders see UK property as excellent quality collateral.

How is equity release under 55 achieved in 2021?

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In general, the older someone is, the more cash he or she will be able to release from the value in the property. But, where does that leave those who are under the age of 55, especially when demand for equity release under 55 is so high.

Option 1 – Remortgage

One option available to those who are under the age of 55 to help increase cash flow is to take out a second mortgage against the home. Doing this is an effective way of using a homeowner’s property to raise the cash they need to do several different projects, including home renovations, repairs required, or even making large purchases.

For more information on remortgages and how it can affect your finances, it is always recommended to speak with a financial specialist before moving forward.

Option 2 – Secured Loans

Secured loans are another option for those who are too young to qualify for a lifetime mortgage or other equity release scheme. Secured loans are loans that are secured with the borrower’s property.

From the borrower’s standpoint, the difference between a secured and unsecured loan is the overall interest rate – since lenders have a guarantee that the loan will be repaid, in repossessing the home, they are more likely to offer much lower interest rates to borrowers who choose secured loans.

Secured loans also have a longer repayment term than unsecured loans, giving borrowers more time to straighten out their finances and get the loan paid off.

Although these may seem like great benefits added to low-interest rates, the longer the loan takes to get paid off the more the interest rates will add up over time, meaning the borrower could be paying back significantly more than the borrowed at the end of the loan’s terms. This is why lenders are comfortable giving out vast sums in secured loans.

Another vital point to think about when considering applying for a secured loan is the security used to take out the loan will be at risk. More traditionally, lenders will only allow a borrower to use the owned property as security – although, in some specific circumstances, other assets can be used.

This means, should the borrower not be able to make his or her monthly payments toward repaying the loan, the lender will have the right to repossess the property to recover the money at risk.

What about Unsecured Loans instead of Equity Release Under 55?

For smaller amounts of funding, lenders may also offer the borrower an unsecured loan option. If you are looking to borrow less than £25,000 an unsecured option will be the better choice, 100 per cent of the time.

Unsecured loans will not put the borrower’s home or other significant, essential assets at risk. If the amount needed is over £25,000, a secured loan is the better option, allowing the borrower to spread out the cost of this financing out over a more extended period which is not available through an unsecured loan.

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by Mrs S Davis on JF

Thanks for your help