With Equity Release Schemes, You Get Money Today
Equity release is basically a way that you can borrow against the value of your home. Although not for everyone, they can be very helpful if you find yourself short of money in retirement. This is a simple explanation of how this can work.
The value of your home less the debt or mortgage that you have on it equals your equity in it. With an equity release plan, you are able to receive money from that equity but still stay living in your home. There is a minimum age requirement for equity releases, usually you need to be more than 55 years old, sometimes older.
Equity release comes in two basic forms, a lifetime mortgage or a home reversion. With a lifetime mortgage, the home is the security for the loan. The mortgage does not require payment, but instead the interest is rolled up against the loan. Should you move out of the home or die, it will be sold to pay off the mortgage plus accrued interest.
With a home reversion, you sell either all or part of your home. You continue to reside there but you are a tenant of the company or person who purchased the property. The home is then sold when you move out or die. If you have not sold 100% of the property the remaining equity will form part of your estate.
You can choose to get the money from the equity release as a lump sum of cash or as a regular income. If you prefer an income, there are some different options you can consider. One is to invest the cash you received as a lump sum into an annuity that provides regular payments. The other is to take an initial lump sum followed by smaller payments as and when required, up to a total amount agreed at the begining of the process. In some instances it may be possible to arrange both a lump sum and a smaller ongoing monthly payment.
There are many questions you will want to have answered before you decide on taking part in this type of scheme. You should know how it will affect your income taxes and any State benefits to which you may be entitled, for example. It also may restrict the money you will have in the future if you want to invest in a smaller home or need money for assisted living or other type of long-term care.
It is also a good idea to consider the use of other investments and savings before undertaking a home reversion or lifetime mortgage. With Home reversion you need to decide if selling your home is really a good idea. With an annuity backed lifetime mortgage you need to compare the return to the risks of this type of loan versus other types of investment. And consider the potential effect on your beneficiaries.
The decision to engage in an equity release scheme is a complicated one and you will need to consider many factors. You are best off discussing it with someone who really knows how they work and can advise you in your particular situation. Go over all the potential future outcomes especially upon your death or need to move into long-term care so your decision is an informed one.
Find out more about the benefits of having a lifetime mortgage today! When you have all the details and information about equity release, you will be able to begin planning for your future financial security more easily!



