Equity Release - Can it Be Used As a Means of Bridging Finance?Posted by Horowitz Snedker on May 19th, 2021 The industry definition of an equity release scheme is an over 55's mortgage, albeit with no monthly repayments & finally settled on death or getting into long term care. It is now becoming more apparent that whereas equity release was once considered an eternity mortgage, people 'temporarily' have the opportunity to take advantage of among providers' shortcomings in its plan features. As equity release has been designed to run for all of those other person's life, lenders have always seeked to add potentially heavy early repayment charges, if the scheme be redeemed early. This penalty could be either linked to the change in government gilt rates, expire following a set period of time or once we shall discuss; from the Bank of England base rate. It is this feature that has provided a window of opportunity should people over 55 require short-term borrowing facilities. Experience has recently shown that retired clients are actually struggling in retirement; income from investments has fallen, annuity rates aren't favourable & pensions are falling in popularity with an increase of reliance on fund performance & contributions than defined benefit schemes. Express Finance London can be evident in this age group & control of finances is now more difficult to manage in today's economic climate, bank cards & loans seeming the most well-liked choice. Nevertheless, there are options available that may resolve these issues - in your free time work is now more apparent to increase retired incomes. Better management of debts & more consumer information being available because the silver surfers are more online savvy. Suggestions about the suitability of equity release schemes will primarily discuss each one of these options & more. Should none of the alternatives be suitable from the client's viewpoint, then at this stage, equity release can be considered as a last resort. However, another one of the options would be downsizing. This would involve the emotive problem of selling a property that may have been a family group dwelling for a generation. However, as a way to raise the necessary funds required this may be the correct solution. Unfortunately, this option might not provide an immediate resolution. House sales are eventually starting to rise, financial firms marginal at present & for a person who requires funds immediately, today's marketplace could prove an obstacle. But all isn't lost - & this is where a temporary bridging facility is available & can be supplied by an ongoing equity release provider. Subject to eligibility, the Prudential's equity release schemes can meet this objective. By releasing equity now with Prudential you'd be profiting from their link with the Bank of England base rate & early repayment charges. In conclusion, the Prudential equity release schemes is only going to levy a penalty should the Bank of England base rate fall from inception to the time of repayment. With this particular rate at an unprecedented low rate of only currently 0.5%, it is highly unlikely (however, not impossible) that the rate would be lower than 0.5% later on. It can therefore be safely assumed that if either of the Prudential's equity release plans are taken out, whether their single lump sum product or innovative increasing cash reserve plan, NO early repayment charge would apply. Therefore, this can be great news therefore for those who have debt issues or need usage of short term funds & not need it affect their tight budgetary constraints. With no monthly repayments required, clients can boost funds this year & following a 12 month period could repay in full or partially, with only a deeds release fee of �105 being levied. This may tie in conveniently with the house market improving around this time frame. With Prudential's interest levels currently only 6.3%, this is a fantastic time to consider this type of borrowing for eligible people over age 55. So as the Bank of England base rates remains at just 0.5% it might be advisable to consider the Prudential plan as a way of short-term borrowing or bridging finance, depending on requirements. The Prudential's Increasing Cash Reserve plan includes a free valuation & �300 cashback on completion until 31st December 2009. So all's not so gloomy in the equity release market as some indicate.Like it? Share it! More by this author |