Equity Release News

Can I Still Borrow Extra Money from a Prudential Equity Release Plan?


For years people have been relying on the Prudential Equity Release scheme in order to finance their retirements. However, as of 2010 new customers are not able to purchase the same products from Prudential.

The trusted name in insurance and financial products will continue to provide the products to those who had already purchased their equity release products. So, those who are already in the Prudential Equity Release scheme are not affected. However, new customers hoping to join the scheme will have to look elsewhere.

This change is possible as a short term response to the unfavourable market conditions brought about by the 2007 recession. However, those in the market for equity release products will be able to find similar products from other financial institutions which are likely to address their needs.

Equity release schemes are an excellent way for people in their retirement to pull out some of the value they have put in their homes. Often they do this in order to finance a large project or supplement their pension.

Now that you will need to shop around through different providers it is important that you understand the current products on the market. Each company may vary the requirements and benefits you receive by a little, but they also understand your need to compare these products. This means that in general those offering equity release schemes will endeavour to make them as similar and yet as different as possible ensuring the product is favourable to you, the consumer.

There are two categories you can put equity release schemes into: mortgages and non-mortgages. Under the mortgage category you have at least four products to choose from, whereas the non-mortgage category gives you one product. Additionally, you should know that all of the schemes are for tax free cash. As long as you take the money in retirement as an equity release scheme you will not be taxed for capital gains or income. This is one reason the equity release concept is popular for retirees.

Lifetime Mortgages
Under the lump name of lifetime mortgages you will be required to be at least 55 years of age. The general age for capping such products is 75 meaning if you are over 75 you would not be able to start an equity release scheme. In the past there have been some equity release products offered as late as 80 years of age, but these are disappearing.

Under the lifetime mortgage category you will have compounding interest. As you keep the loan unpaid the interest will continue to grow based on the loan’s APR or annual percentage rate. This adds to the principle balance which is the lump sum you take out.

You can use the money on anything from daily living to extravagant holidays; however, when you pass on or move out the money and all interest has to be repaid. It may require your home to be sold and no money left to your beneficiaries. It depends on if the interest accrued puts you into a negative equity position. Given the negative equity clause your family will not be liable for any sum over the value of your home. Drawdown, roll up, enhanced, and interest only are the four options to compare regarding lifetime mortgages.

Home Reversion
Home reversion is a non-mortgage option. Rather than take out a mortgage that accrues interest you can sell all or part of your house. This sale is not for full market value. Instead, you are paid a percentage of the value based on the percentage of home you sold. This keeps the house from going into negative equity during your lifetime and gives the provider a way to recoup the money they invested in you.

You do have to be 65 years of age at least and want to sell part of or your entire house. The difference is that you do not owe money when you die or move to a care facility. Additionally, you do not pay rent because you are given a lifetime tenancy agreement that includes a free rent clause. This can help you save money for the more important things, as long as you do not mind selling your home.

The Prudential Equity Release product was popular amongst those taking up equity release or lifetime mortgages. The Prudential name was always attractive to potential customers. However, there are other financial institutions who still offer products that compare to the Prudential ones, so those in the market to release equity from their homes will likely find a suitable product from a different supplier.