Sep 19

What Is Equity Release

Equity Release No Comments »

What is Equity Release?

If you are in need of funds, and you have a home in which you live, you can generate an income or raise lump sum amount through equity release of your home, and continue to live in your home as well. People in the UK often remortgage their home they are living in. This is done by transferring the outstanding mortgage debt on the property to a new one. By doing this you do not need to move away from your home. Further, it is not necessary for you to find a different lender, since you can easily get your second mortgage with your existing lender. This way you can raise funds for your other requirements, provided the home that you are remortgaging is worth more than your existing mortgage debt. Before you venture into equity release, you should consider all aspects, since the mortgage that you have, and your would be second mortgage are two of the biggest financial commitment that you are likely to have.

Why do you need equity release?

In remortgaging your home, you could have two reasons to do so. One that you wish to raise a comparatively lower interest funding to pay off high interest borrowings, or have renovations done to your home. Your home might be costing more than your outstanding loan, and you want to take advantage of this in form of some of the equity in your home. By taking out a second mortgage on your home, you may be able to raise funds at a better interest rate, substantially reducing your monthly outgoings, and financially gain considering the present credit crunch prevailing in the United Kingdom.

In recent times, the mortgage market in the UK has been facing quite tough challenges, with a decrease in availability of mortgage products. This has been due the stringent financial crunch existing in the country. Lenders have become very careful with lending, and borrowings have become scarce. Even it is available, interest rates have gone high as a measure of lending risk protection. Therefore, it has become difficult for a borrower to find loans charged at suitable interest rates. However, if you decide on remortgaging your home, it would be worthwhile to look for availability of better deals before deciding on a lender. This would mean that, you would be looking for lower interest rates, affordability of your monthly outgoings against your borrowing, and the value that you get on your equity release.

If you have short term debts, or if you wish to have renovations done, one better way to raise cheaper loan is through equity release of your home, provided the value of your home is presently much higher than your existing mortgage or collateral. People also raise funds in this way to pay for their holidays, or a new car, but mostly equity release is used to pay off high interest loans, or pay for the home renovation expenses. With all said and done, by remortgaging, you are risking repossession of your home if you do not pay your installments towards your borrowings regularly.

How do you gain?

Your credit card outstanding balance, your personal loan, overdrafts, and all other such short term loans carry high interest rates. The debts have mounted up and high interest goes on accruing on the outstanding. At one point of time you find the repayment to be hopeless. You would go for equity release, and then would have your short term debts consolidated and paid off. By this you will save on interest, and your monthly outgoings will be well within your reach. What you will be doing is to replace your high interest unsecured short term loans with a much lower interest loan on your house in the form of equity release. By doing this you will be getting more financial freedom on your installment payments.

Second mortgage, or remortgaging your home is a better way to get rid of your bad short term debts, and mostly people go for equity release for this purpose. It is a sort of financial recovery that you go through, gaining substantially on interest payments, and saving on monthly outgoings. With short term high interest loans, people very often find themselves in a situation where they are not able to meet their financial commitments. This could have various reasons. An illness in the family could mean larger medical bills, and as you try to meet those expenses, you default on your short term loan repayment schedule. Once you do that, the interest accruing on your monthly outstanding becomes alarming. It is better for you to consider debt consolidation, and paying off the loans by raising funds through remortgaging your home.
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Sep 10

How To Write Off My Debts

Write off Debts 1 Comment »

When you are not able to re-pay your debts due to your financial difficulties, you have certain solutions at hand. You can take up the matter with your creditors, and explain to them convincingly the matter of your financial instability, and let them make concessions on the terms on which the loan was given to you. You can negotiate the interest rate, and get the fees levied on the loan waived off.
The total outstanding balance could also be negotiated to an affordable level. Along with this, the lenders might consider bringing down the amount on your installment payments to make it easier for you. If you like, you could also approach your creditors through credit agencies, or a lawyer who takes up the matter on your behalf.

The second option is to sign on a debt management plan. In case you are going through a deep financial crisis, and you are not being able to re-pay your debts, you might consider taking advice from a credit counsellor. The credit counsellor might advice you to go in for debt consolidation, where all your debts are merged into one. This task is mainly done by credit agencies, which take up the matter with your creditors, and bring down your liability to an affordable level. In this case you pay only one installment every month to the credit agency, who distributes the money to your debtors.

There is yet one other option which is available in UK, where you actually write-off a part of your debt. You might have solutions to your debt problem through debt management or remortgages, but these would only provide you with a relief in interest rates, and waiving off of certain fees. These do not let you write-off debts, but in fact replaces one debt with the other. On the other hand, writing off debts provides you with greater financial relief. You may go and file for bankruptcy to write off all your debts, but the consequences may become severe, and this should be kept as a last resort.

The Individual Voluntary Arrangement (IVA) in the United Kingdom provides a solution to debtors, where you can write-off a large percentage of your debt, provided you are found eligible. The amount that could be written off depends upon your financial capability to pay back your debts. IVA is a debt relief solution which is backed up by the United Kingdom government. If you are going for IVA, there is one aspect which is very important. The IVA must be accepted by your creditors. Once your creditors accept IVA, it becomes legally binding, and this would mean that the amount of debt to be written off has been agreed upon, and cannot be changed by the creditors even two years later. You, as a debtor, are legally protected against this.

The draft of the proposal is generally drawn up by a licensed Insolvency Practitioner on your behalf, which is provided to you for your comments. After finalising the issues, the document is sent off to all your creditors. The creditors, however, besides rejecting or accepting the document, may want changes, and these changes would only be incorporated into the document after you have approved them. The Insolvency Practitioner has to make sure that you truly have a deep financial crisis in hand, and also that you are capable in keeping up with the payment of your debt after it has been partially written off. These have to be ensured by him before he makes his recommendations.

The process of writing off becomes legally binding as and when the creditors accept the terms. Though the creditors cannot change their minds regarding what they have agreed to, there could be problems in the arrangement if you fail to keep your part of the promised payment of installments. You and your creditors are legally bound by IVA, and it is an arrangement that has been done by the Insolvency Practitioner who is also responsible to supervise the arrangement as far as its smooth running is concerned.

The IVA contract ensures that you are not put under any pressure of paying more than what you can afford. The total re-payment of the consolidated debt has to be paid by you over a fixed period of time. IVA is an arrangement which is totally private, and it is kept between the people who are directly concerned with your debt. While your debts are being governed by IVA, you are allowed to take out fresh mortgage on your property if you so desire. IVA ensures protection of your home, and your employment.
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