Benefits rule over the risks when it comes to equity releases. Advice from a reliable source can help you to get the equity release that suits you the best so that you can enjoy its benefits year after year.
What is Equity Release?
Equity Release is the means by which you can utilize the worth of your house or other objects having capital value to receive either a significant cash amount or regular monthly installments. Equity release can:
• add to your retirement income
• compensate your mortgage
• help in your home improvements
• assist you to buy a holiday home
• help out your children to get on the property ladder
The UK equity release market offers three types of equity release plans – lifetime mortgage, home reversion plan and interest only mortgages. The UK equity release market is now under the surveillance of the Financial Services Authority (FSA).
Needs Determine the Choice
It’s the commitment and obligation that play a pivotal role in equity release selection.
Lifetime mortgage: If you are around 55 and want to release some of the equity built up in your home without going into the intricacies of monthly repayments, then this is the best plan for you to bank upon. In this plan, a loan held against your home generates an income. During the term of the loan, the interest is added to the capital. After your death or when you move out into a care home the complete amount is paid back to you by selling the property.
Advantages of Lifetime Roll Up Mortgages
• Obtainable by young people unlike the other schemes
• Free from the intricacies of monthly repayments
• Doesn’t depend on your income
• You can decide how to spend or invest your money
• Since you have full ownership of the property you can live in your home as long as you want
• Flexibility of the scheme
Home Reversion Plans: This plan is ideal for those who have reached 65 years of age. It allows them to sell all or a part of their home to any reversion company for a fixed amount of money. Under this plan you won’t have to repay the loan and can obtain a steady income while staying in your home for a lifetime or until the house is sold. After your house is sold, the reversion company gets equal proportion of the sale proceeds and both parties receive the benefit if the price of the house goes up in the provisional period.
Advantages of Reversion Plans:
• The loan amount is known right from the beginning
• You can know beforehand how much of the home you will pass on to your family
• Large loan amount is made available
• Less affected by falling house prices
Interest Only Mortgages: Several banks and building societies offer interest only mortgages to retired people, helping them to release capital. According to this plan, you have to repay only the interest amount and not the capital to the lender. Your income determines the amount you can borrow under such schemes. Repossession of your home may take place in case you do not make repayments.
Advantages of Interest Only Mortgages:
• Debt amount remains the same
• Suitable for young people
• Unlike lifetime mortgages the interest is fixed
• Lower setup fees
• Can be a short-term substitute measure for people who prefer a special scheme
Take a deep breadth and gauge your situation. Only then can you make a wise decision!
Richard Martin offers professional advice on
equity release services. Find more information visit -
theequityreleasebureau.co.uk
