Equity Release - Could it be Used As a way 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 without monthly repayments & finally settled on death or getting 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 designed 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 after a set period of time or as we shall discuss; linked to 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 shown that retired clients are now 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. Increasingly more debt 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 possibilities that may resolve these issues - in your free time work is becoming more apparent to increase retired incomes. Better management of debts & more consumer information being available as 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 perspective, then at this stage, equity release can be viewed as as a last resort. However, another one of these options would be downsizing. This would involve the emotive issue of selling a property which could have been a family dwelling for a generation. However, so as 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 beginning to rise, financial firms marginal at the moment & for a person who requires funds as soon as possible, today's marketplace could prove an obstacle. But all isn't lost - & that's where a temporary bridging facility can be acquired & can be provided by a current equity release provider. At the mercy of 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 lender 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 really is highly unlikely (but not impossible) that the rate would be lower than 0.5% later on. It can therefore be safely assumed that when 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, Express Finance can be very good news therefore for people 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 raise funds this year & after a 12 month period could repay completely or partially, with just a deeds release fee of �105 being levied. This may tie in conveniently with the property market improving around this time period. With Prudential's interest levels currently as low as 6.3%, this is an excellent time to consider this form of borrowing for eligible people over age 55. So as the Bank of England base rates remains at just 0.5% it would be advisable to take into account the Prudential plan as a means of short-term borrowing or bridging finance, based 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 |