While it is an excellent concept, there are a large number of hooks
you should be aware of before you begin talking to a representative
of a company offering these products.
In the first instance, please always seek independent advice from both
your financial adviser (who may make commission on the transaction)
and your lawyer.
The following are examples of the more obvious issues you should be
- It is not the panacea for a lack of cash that you might have hoped
for. In fact, you will be surprised at how little cash you can actually
extract under these arrangements.
- Some options require the loan to be repaid when it reaches a certain
level. Avoid this option, unless you want to be forced into selling
up and flat hunting when you are 83 years old.
- In most instances, the loan is generally repaid when the house is
sold. It is probably wise to only consider these options when you
know your next home will be either permanent care, or with the angels.
- There can be a number of initial and on-going fees, such as valuation
fees, which need to be understood.
- The concept is sold on rising property prices and low interest rates.
When the reverse occurs, the value of your equity is rapidly reduced.
This would limit your ability to obtain further funding and, of course,
will reduce any intended inheritance.