If you are refinancing your home, you have probably been given a key equity release cost sheet to look over. If you don’t understand this sheet completely, it is okay – we will help to explain some of the terms that are included here. In general, these costs are calculated as your loan balance less the cost of the interest-only payment and your first-year home insurance premiums.
Key Equity Release provides long term loans only to borrowers who own their homes. Generally, a long term loan is a secured loan against your house and can impact your eligibility for other means-tested benefits such as low interest rates and/or long term retirement benefits. Long-term equity releases are generally more expensive to obtain, so if you plan to sell your house in the future, it is important that you get one of these equity release loans to ensure the lowest possible total cost when selling. On the flip side, if you currently own your house and plan to stay in it, you may not be able to qualify for a long term loan or an interest only release – you must instead select an interest only or a fixed rate release with the long term option. While these rates are typically cheaper when compared with interest only payments, they will increase significantly over time, even if your house prices do not appreciate. If you want to take advantage of these long term equity release options, you should attempt to sell your house while its price is still low (or as soon as it begins to appreciate).
There are two additional types of equity release costs associated with this type of loan. First, there are lender fees associated with the lender’s services. For example, a home inspection fee may be assessed if you have not had a home inspection within the last five years. In addition, there is also a title fee which is charged by the title company on the loan if you did not have a house title within sixty days prior to applying for the mortgage.
These fees will typically apply irrespective of whether you take out an equity release or a regular mortgage. In fact, you will be required to pay the same interest on your loan regardless of whether you choose to go with a conventional loan or a release. Finally, you will be charged a set fee for the opening and closing of your new account. This fee can often be avoided by simply completing your application and mortgage paperwork through one of the various online vendors and clearing your title and other necessary documents before you submit your completed application.
What about “hidden” equity release costs? Unfortunately, lenders are not typically open about their various rates and fees in their documentation. This means that you are often required to conduct your own research or spend hours calling each company in order to obtain the information that you need. Fortunately, the Internet has made it very easy to determine all of the relevant information that you need in regards to any aspect of your borrowing decisions. There are websites that compile basic information related to any number of different types of consumer debt and equity release options. Using one of these sites, you can quickly and easily obtain the information that you need in order to make an informed decision regarding your options.
There is also a very simple way to reduce your “hidden” equity release costs. You can pay your annual tax return on time each year. This may sound like a no-brainer, but it is surprising how many people either neglect to remit their taxes, or they forget about them altogether. By paying your taxes on time each year, you are ensuring that you are not only complying with all applicable laws, but you are also avoiding the extra costs and fees associated with not paying your taxes on time.