Equity release is a form of lifetime mortgage which is secured on your home & assists people who are retired & over 55 to access money tied up in their property.
A description of ‘equity’ is the net assets of your property, equating to its value, less any loans or mortgages secured on it. This equity is the cash that you can be looking to release to help your cash flow in your retirement years.
. This cash released can be spent on any purposes the borrower requires with no restrictions placed on how it is spent by the lender.
However, the most popular purpose of equity release is for debt consolidation reasons. This could be the repayment of your mortgage or any loans, credit cards or HP agreements taken out over recent years.
Once these debts are repaid, they have the effect of reducing your monthly outgoings & giving you extra disposable income to enjoy.
You can also carry out home improvements including building a new conservatory or even new kitchen, bathroom or maybe landscaping the garden.
From my 10 years of experience in the equity release industry I have found the uses for the tax free lump sum to be limitless, but for many; life changing!
So how does equity release work?
Equity release schemes can either provide a lump sum, or even an income to help your finances during retirement. The plan has NO fixed term & will therefore run for the rest of your own, or your partner’s life.
The lender will place a first legal charge on the residence so that when the property is finally sold they receive their payment first. Any money left over is then passed onto your beneficiaries as detailed in your Will if you have made one.
As you can see, equity release is in effect is a mortgage but with no monthly repayments. With no repayments required, equity release schemes have NO resulting effect on one’s outgoings when affordability can be a key issue.
There are two types of equity release schemes; lifetime mortgages & home reversion plans: –
A lifetime mortgage is the more common plan available. In essence these schemes are a form of retirement mortgage, but with interest added to the capital annually. The amount that will finally need repaying depends upon the duration of the paln term & how much the property is sold for at the end of the day
The Home Reversion scheme works by the homeowner selling a percentage of the property. The reversion company then part-owns the home. The reversion company then retains this percentage when the house is eventually sold. Therefore, there is a guaranteed inheritance for the children.
Mark Gregory is the founder & director of Equity Release Supermarket who have been accredited ‘Best Financial Advisers’ at the Equity Release Awards 2008. Mark is an experienced Independent Financial Adviser who has now been providing quality advice on retirement finance for the past 10 years. As a result of his experience, he has exclusivity to deals with some of the UK’s leading financial providers. Mark aims to pass on his experience in assisting the over 55’s decide which method of releasing equity is the right choice for them. Information can be found on equity release & all you need to know about equity release schemes by checking out our market leading website at http://www.equityreleasesupermarket.co.uk