All You Need To Know About Equity Release Schemes

What is equity release? An equity release is when you retain the home you’re living in while receiving a lump sum of cash from the value on the home. There are many equity release schemes available, such as an interest only lifetime mortgage, home reversion, and roll-up lifetime mortgage. With each of the equity release schemes, the homeowner can remain in the home until they die or leave the home permanently. Also, with a few of the equity release schemes, you can live in the home rent free. The interest will continue to increase each month and won’t be repaid until you die or sell the property.

Many homeowners don’t know what is equity release because they haven’t been educated on the subject. Homeowners can find out information on equity release schemes by getting in contact with an independent equity release adviser. The adviser will let the homeowner know what equity release schemes are available and which ones would be best for him or her.

Whichever equity release scheme you decide to get will offer you some benefits. You will be able to have a steady flow of money coming into your home each month. The money that you are already receiving from your pension may not be enough. That is where the equity release scheme comes into place. There is no need for you to struggle to make ends meet when you retire. The money can also be used to buy things that you need, such as a car. All retirement individuals should buy themselves a new car when they retire.

Besides buying a car, fix up your home. Since you plan on staying in the home for as long as you can, you may want to redecorate. Hire builders and other professionals to tear down walls to build an extra bedroom or to install new bathroom fixtures.

An equity release can change your life. You can borrow the maximum amount or just what you will need. Once you find the right equity release scheme, all you will have to do is apply and wait for the money to start coming in. Your financial problems will be over once you receive the money.

There are certainly benefits to the products known as equity release; however, you also need to understand the disadvantages. You do not want to leave a difficult situation for your beneficiaries and remaining family due to troubling debt. Your beneficiary will have to pay off any mortgage you take out in the form of equity release. This is done with the estate you leave behind, but what if it is only a house? The house the loan is on? You would need to sell the house before you die or have it sold after your death. In the case of home reversion you actually sell a piece of your home or the entirety of it.

Home reversion may not have a repayment and interest, but you could end up losing your home for your family. On the other hand you do guarantee that your family has cash upon your death; of course, that is if you have only sold a part of the home and the current market value is not less than the payment you received.

Lifetime Mortgages
Lifetime mortgages are a different equity release from home reversion in nearly every respect other than getting tax free cash, a lump sum or payments, and attaining such a release during your retirement.

Basically, you do not sell your home which is a plus for many. Again though, you might have to sell to pay the loan back. The loan will also be accruing interest during your lifetime for as long as the loan balance is outstanding. This can be a particular problem for those who truly need to leave behind no debt because home values can change.

Your home may become negative in terms of equity in which case you need a negative equity clause to protect your family from paying back any amount the sale of the house did not cover. There is no guarantee of inheritance with this option.

As you can clearly see above, there are definitely situations that could make either home reversion or lifetime mortgages more appealing. Now that you have an answer to what is equity release, you need to determine the best deal for your situation. Speak with family and advisers before you commit to a financial product such as the above. You need to have all the information before you decide.