Equity release allows elderly individuals or couples who have retired and own a property to use the value of their property to receive a monthly income or a large tax-free lump sum of cash without selling them. Many elderly individuals are in the plight of living with a very low income in spite of owning properties of much higher value, equity release helps in providing them with the cost of their property without actually selling it. The company providing the service takes away the property only after the individuals die or they move in to care. These kinds of plans are beneficial for some people while others feel it as an inconvenient compare car insurance. The following is lifetime mortgages explained in detail to help you make the right decision.
Lifetime mortgage is a form of equity release which is the most popular product as this scheme allows the property holder to stay in the property until he wants to leave or until he passes away. This scheme provides the individual with a lump sum of money equivalent to the value of the mortgage calculator or else provides a regular source of monthly income. The company offering the service charges interest on the money that they are lending and it is added up as a compound interest and only repaid once the owner has died, so no monthly payments are required.
Alternatives to Lump Sum Payments
Lifetime mortgages explained - the way the company is going to give you a source of income from the equity release mortgage you possess. One other alternative available is the draw down feature which allows you to withdraw money from your pot so you only get taxed on the money you withdraw. The equity release calculator allows you to have access to tax-free amount immediately and also allows you to flexibly change your income on the basis of your requirement.
Assessing Interest Only Concepts
The interest only plan allows one to take out a loan against the owner’s property, this means that no monthly payments are required but the interest is compounded and added to the original amount loaned and is paid off once the owner has passed away. The Equity Release Home website has further information on interest only plans and compounded interest.
Enhanced Lifetime Sums
Lump sum payments in the form of a regular lifetime mortgage can be useful. Drawdown is an alternative that might suit you better if you do not need a lot of cash at once. Interest only plans ensure you pay something to the loan and keep a bit of inheritance for your family. Enhanced lifetime mortgages are different in that you have an illness or reason for your life expectancy to be well below that of the average retiree seeking lifetime mortgage plans.
Perhaps you have a chronic illness, cancer, heart disease, or even diabetes. Life expectancy can be much lower with these issues than a normal healthy person. Of course a healthy person can die suddenly too. The point is there is a mortgage out there for retirees who have health problems and are in need of a larger lump sum than even the regular lump sum mortgage can provide. The theory of this mortgage is that you will repay it earlier than the average lump sum mortgage due to a shorter life expectancy.
You Want to Leave Your Family Something
How many times have you thought about your family and how they should have an inheritance after you are gone? This is a thought many individuals have and the reason that lifetime mortgages worry home owners. They are worried that an inheritance might not be possible. There are two things you can consider.
The first is that with an interest only loan you pay off the interest and leave only the principle balance behind. The amount borrowed is never 100% of the property value. If the property value decreases there is still potential to leave an inheritance. If it increases there is a larger inheritance. Drawdown mortgages are dependent on the amount you actually use thus there is potential to protect an inheritance.
The other is to have an inheritance guarantee that sets aside a percentage of the home value for your family. It cannot be touched even if the interest and loan amount are over the value of the home.
Choose the plan that suits you the most and then make your retirement period really a time of relaxation. However you will have to take into account all the above discussed pros and cons when reaching a decision on such a crucial financial decision. You are armed with information after reading lifetime mortgages explained so be thorough, careful, and remember you make the choice in the end.
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