Loans Choice
www.loans-choice.org.uk
Instant pay-day loans are a source of a quick cash loan.
Secured personal loans and homeowner loans; read our guide.
You may get a better rate of interest with a tenant loan.
Cheaper or instant unsecured loans are often available online.
Careers Development Loans in the UK are used to fund courses to improve employment skills.
Loans for the purchase of cars and caravan finance.
Pre-paid debit cards are useful for people with bad credit ratings.
Unlike credit cards, debt consolidation loans are secured on property.
An IVA can reduce the amount you owe.
A cheap mortgage or remortgage can also be used for other purposes.
AER (Annual Equivalent Rate) is used for savings.
Repair your poor credit history.
Equity release is intended for cash poor but equity rich people.
Home Equity Release UK
Equity release mortgage plans are a means of releasing cash that is 'tied-up' in the value of your house without the need to move home. They can be conveniently divided into four main schemes.
- Equity Release Reversion Plans
- Equity Release Lifetime Mortgages
- Equity Release Drawdown Lifetime Mortgages
- Home Income Schemes using Equity Release
Each scheme has its own advantages and disadvantages. To qualify, you must be at least 55 and your property must be worth at least £70,000-£80,000 and have very little or no outstanding mortgage. Any outstanding mortgage must be paid up by the loan you are taking out. Equity release loans are particularly suitable for 'asset-rich' and 'cash-poor' individuals or couples. Please note that some companies will not accept flats as security but freehold properties are often considered favourably. Leasehold properties, as long as they have at least 75 years of the lease to run are also acceptable to most lenders.
The released capital can be used for any purpose such as home improvements, buying a new car or holidays etc.
Equity Release Reversion Plans
In a reversion scheme you sell part or all of your property to a bank or building society. In exchange, they give you a tax-free lump sum and the right for you and your partner to live in the property for the rest of your life. However, the amount you get will not be equivalent to the proportion of the property you are selling. For example, if your house is worth £200,000 and you sell half of it, you might expect to receive £100,000. You will probably only get in the region of £80,000. The reason for this is that half of the house is not yours anymore so the reversion company is charging you £20,000 rent, in advance, for living in their half of the house. In addition some companies will also typically charge £1 a month as a peppercorn rent.
You can still move house if you want to and the proceeds of the sale will be split between you and the reversion plan company in the proportions that each owns. In the above example it would be 50-50. This is exactly the same as would happen after death.
Equity Release Lifetime Mortgages
Lifetime mortgage plans (sometimes called rolled-up interest loans or roll-up loans) are very similar to ordinary mortgages and remortgages except that instead of making interest payments each month the amount owing is allowed to add up. The interest on the loan is finally paid when the house is sold after your death. Mostly these loans have a fixed interest rate but you should make sure that you check this point with a potential lender.
You can usually borrow between 18-50% of your property's value. The exact amount depends on you or your partner's age; the lowest age counts and the lower it is the less you can borrow. You can usually borrow more using a reversion plan than a lifetime equity release mortgage.
A disadvantage of this scheme is that interest adds up rapidly and it is quite possible to build up negative equity. This means that you owe more than the house is worth. However, if you take out a plan that has been approved by SHIP (Safe Home Income Plans; a self-regulating trade body) it guarantees that you will not be allowed to build up negative equity. Make a special point of checking and understanding how negative equity will affect any lifetime mortgage plan you are considering. Better still, ensure that you are given a 'no negative equity guarantee'.
In addition some lenders will allow you to borrow a lump sum which is repayable from the sale of your property on death but will allow you to pay monthly the interest due on the loan. This will also ensure that negative equity is not a problem.
Equity Release Drawdown Lifetime Mortgages
Instead of taking a single lump sum with a lifetime mortgage plan, a drawdown mortgage will allow you to take regular monthly amounts or lump sums as and when you need them. This has the advantage of giving you a regular income and keeps the amount owing at any time to a minimum so that interest does not build up so quickly as it does with an ordinary lifetime mortgage. The danger of negative equity is therefore much reduced. However, there may be a minimum amount that you must withdraw in a given period to make it worthwhile for the loan company to run the scheme.
Home Income Schemes using Equity Release
These schemes can involve a reversion plan or a lifetime equity release mortgage and their main aim is to provide you with an income for life. They will probably involve puchasing an annuity with the money raised by the mortgage to give you the required monthly income.
Since no two cases are alike it is advisable to have your own individual circumstances examined by a financial adviser before making any final decision.