What is Equity Release?
The amount of equity that you have in your property can have a huge influence on any future financial decisions that you make. Read on to find out why.
If you’re about to start reading this article with no idea what equity release is, don’t worry! We’ll explain. It’s basically a range of products that let you access the equity that you have in your home if you are over the age of 55. This can either be released in one big lump sum or alternatively you can have smaller amounts released slowly over a longer period of time. It’s up to you! Let’s read into this a little more.
Equity release options: Lifetime mortgages
When it comes to releasing equity there are two main options. Firstly, let’s take a look at lifetime mortgages. This is arguably the most popular mortgage option for those who are releasing equity. This is basically where you take out a mortgage which is secured against your property as collateral during your residence. From this, you can choose to allocate some portions of your property’s value for things such as inheritance or just general cash savings.
With lifetime mortgages you can either choose to make repayments towards it or instead, the unpaid interest is added to the mortgage amount. In this case, the mortgage amount plus any interest that you added to the loan rather than paying would be taken out of your estate when you pass away or you begin to receive care towards the end of your life.
If you’re only just beginning to understand equity release, let’s go over some useful nuggets of information to help develop your understanding. Unfortunately for those of you spring chickens in the property market, the minimum age at which you can take out a lifetime mortgage is about 55. Generally, you’re also only allowed to borrow around 60% of the value of your property. Though, the amount that you will be able to release will be hugely influenced by your age and the value of the property itself. In crude terms, the older you are the more you can borrow as the lender will have less time to wait before they get their money back !!!
Equity release options: Home reversion
Alternatively, you can go for a home reversion. This is basically where you sell a portion or your entire equity in your home in exchange for a lump sum of cash. If this doesn’t take your fancy you can opt for the amount to be slowly released, You’ll also have the right to live in the property until you pass away completely rent-free. However, you will have to run regular maintenance checks to make sure that the condition of the property is in order!
Doesn’t sound too bad, does it? You can also allocate a portion of your property to use in the future. Also, the percentage of the property that you keep following the equity release will be the same even if your property’s value changes. Then once your home reversion plan has finished you can then sell the home with the takings being divided accordingly between the owners.
What Mortgages Online can do:
If you have any more questions about what equity release is, and how can affect the mortgage that you go for in the future don’t hesitate in giving us a call! We can provide you with free, impartial and up to date advice on any of your mortgage queries. So, don’t hesitate in getting in touch!
