Equity Release - Could 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 can be an over 55's mortgage, albeit with no monthly repayments & finally settled on death or moving into long term care. It really is now becoming more apparent that whereas equity release was once considered a lifetime mortgage, people 'temporarily' get the chance to take advantage of one of providers' shortcomings in its plan features. As equity release has been made to run for the rest of the person's life, lenders have always seeked to add potentially heavy early repayment charges, should 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 as we shall discuss; linked to the Bank of England base rate. It is this feature which has provided a window of opportunity should people over 55 require short-term borrowing facilities. Express Finance SW15 2021 has recently shown that retired clients are actually struggling in retirement; income from investments has fallen, annuity rates are not favourable & pensions are falling in popularity with more reliance on fund performance & contributions than defined benefit schemes. Increasingly more debt is also evident in this age group & control of finances is now more difficult to manage in the present economic climate, credit cards & loans seeming the preferred choice. Nevertheless, there are options available that can resolve these issues - in your free time work is becoming more apparent to improve retired incomes. Better management of debts & more consumer information being available as the silver surfers become more online savvy. Suggestions about the suitability of equity release schemes will primarily discuss all these options & more. Should none of the alternatives be suitable from the client's perspective, then at this time, equity release can be viewed as as a last resort. However, another one of the options would be downsizing. This might involve the emotive problem of selling a property that may have been a family group dwelling for a generation. However, as a way to improve the necessary funds required this can be the correct solution. Unfortunately, this option may not provide an immediate resolution. House sales are eventually starting to rise, however this is marginal at the moment & for someone who requires funds as soon as possible, today's marketplace could prove an obstacle. But all is not lost - & this is where a temporary bridging facility can be acquired & can be provided 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 benefiting from their link with the Bank of England base rate & early repayment charges. In conclusion, the Prudential equity release schemes will only levy a penalty should the Bank of England base rate fall from inception to the time of repayment. With this rate at an unprecedented low rate of only currently 0.5%, it really is highly unlikely (however, not impossible) that the rate will be lower than 0.5% down the road. It could therefore be safely assumed that if either of the Prudential's equity release plans are taken out, whether it be their single lump sum product or innovative increasing cash reserve plan, NO early repayment charge would apply. Therefore, this can be very good news therefore for those who have debt issues or need access to short term funds & not need it affect their tight budgetary constraints. Without monthly repayments required, clients can boost funds this year & after a 12 month period could repay in full or partially, with only a deeds release fee of �105 being levied. This could tie in conveniently with the house market improving around this period of time. With Prudential's interest levels currently only 6.3%, this is an excellent time to consider this form of borrowing for eligible people over age 55. So while the Bank of England base rates remains at just 0.5% it could be advisable to take into account the Prudential plan as a way of short-term borrowing or bridging finance, depending on requirements. The Prudential's Increasing Cash Reserve plan comes with 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 |