Ask your adviser – Part 1

Financial Planning, Equity release

At Planned Departure, we believe in empowering people by educating and guiding them about life planning and legacy.

With this in mind, I am beginning to write a new series. The idea is to empower people to ask the right questions when going for financial advise. My notes are simple and easy to understand. I have tried not to use jargons unless absolutely necessary. Please send me your feedback, likes or dislikes.

What is “Equity Release”?

It is a financial arrangement / contract by which you can sell a part or whole of your house / property and still remain to stay in that house / property without paying any rent. You will however pay all other expenses relating to the house / property. In this process, you can receive cash upfront or as a monthly pension for as long as you are alive. After your death, the part or whole of your house / property is legally transferred to the other party in the contract. This other party is usually an insurance company.

Please ask the following questions for an informed decision making.

1. What is the type of arrangement he/she is proposing?

  • E.g. Lifetime mortgage
  • Interest only mortgage
  • Home reversion
  • Shared appreciation mortgage
  • Home Income plan
  • UK Equity release schemes

2. What is the

  • Valuation of your property on which you are signing the contract
  • LTV (Loan to Value) of the mortgage (to ascertain amount of Equity being released)
  • Amount of annuity being purchased (if you are opting for monthly pensions)
  • Interest rate levied (for upfront cash receipts)

Please remember that

  • You will have the right to live there as long as you are alive and also be responsible for all costs associated with the property.
  • If you have chosen to take upfront cash, you can use it as you wish. Perhaps, go for a World Tour?
  • You can also refinance in the years to come, if interest rates fall drastically.
  • You are reducing or completely eliminating the possibility of your family inheriting your asset after you have died, especially if the appreciation of your asset is slower than the rate of interest on your contract.

Note: Please do not treat this as financial advice.

Author: ashishsaraff

Ashish is the Chief Distribution Officer at Planned Departure. His key responsibilities at PlannedD include growth, product, go to market and distribution strategy and implementation. Prior to this, Ashish has spent over a decade in financial services intermediation in Eastern India. His past ventures included insurance distribution, capital markets and commodities broking. He is a seasoned executive with vast expertise in strategy, business development, distribution, finance, audit and compliance. He is an experienced entrepreneur, establishing new business in multiple geographies with diverse cultures. Ashish holds a Bachelors degree from Calcutta University and has earned his MBA from London Business School.

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