Equity release is the means of obtaining a fixed stream of income or a cash amount by using the value of your property while continuing the use of your property. Equity release is especially useful to retirees whose main focus is on maintaining their daily needs or enjoying their retirement to the fullest and not so much on leaving an inheritance for their children. The fact is that equity release schemes are normally repaid at a later stage. This is normally when the borrower and their partner dies.
There are several options available to elderly home owners when it comes to equity release. One of the most common options is the lifetime mortgage option in which a borrower obtains and secures a loan against his property. This loan is repaid through the sale of the property after the borrower and his partner dies or chooses to move into a care home. Compound interest is normally charged to the capital loan sum throughout the duration of the loan and is repaid together with the capital loan sum. During the duration of the loan, the borrower remains the owner of the property and is responsible for taking proper care of it.
Another common equity release scheme is the interest only lifetime mortgage which is very similar to the other forms of lifetime mortgages with the exception that the interest amounts are being paid on a monthly basis during the duration of the mortgage. There are several products under this heading of interest only lifetime mortgages. Some can be coupled with a roll-up scheme which is the standard lifetime release. You pay a portion of the interest and the rest is rolled up into the mortgage amount. The more interest you pay in a month the less that accrues onto the initial lump sum. It is wiser to go with an interest only amount you can afford and one that does not add to the initial capital sum.
Besides the two lifetime mortgages already discussed you have two other options. These may not be available through all equity providers with equity release schemes. The first is a fairly new product called the enhanced lifetime mortgage. It is for a person with a shorter life expectancy than the average retiree. It may be an illness, genetic disorder, or disease attained in life like something from smoking. Whatever the health issue is there is evidence that a person is not going to have longevity on their side. This allows you to gain a larger lump sum and to live your life in comfort for those years.
The other option is drawdown mortgage. This choice is still an accrual of interest onto the principle balance; however, you pay interest for only the money you use. You have an account set up with the equity released sitting in it. As you withdraw a sum of money it gets interest attached to it. If you leave the majority of money in the account or just take what you need, you can ensure a smaller repayment in the end.
The home reversion scheme is one of the less common and flexible equity release schemes. It involves the selling of the property with the option of allowing the home owner to remain in the property until he and his partner dies or chooses to move into home care. This means that some or all of the property will belong to the home reversion provider in exchange for a cash amount or a steady income.
Home reversion schemes are desired because there is no repayment scheme and no interest attached to the balance. The money is yours free and clear because you sold a portion of your home for it. It is not ideal if you hope to keep your home; however, for those who do not care as much about this it can be the better option than leaving a burden of debt. It is also a great way to guarantee that inheritance you wish to leave behind.
Always speak with your family before you make a decision. They will be affected by your choice in equity plan, so it makes sense that they know what is coming.
The Stonehaven equity release plans are amongst the many different equity release schemes offered. Two of the most common equity release schemes offered by Stonehaven are the interest select plan and the roll-up equity release plan providing home owners with an additional source of tax free income which they can use for whatever they please.
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