People who own a property with little or no mortgage have what is termed as ’equity’. Equity can be calculated by subtracting the mortgage amount from the value of the property. If there is no mortgage on the property, the total amount of equity that the homeowner has is equivalent to the value of the property. This equity is tied up in the property and can be accessed through the process of equity release. Consider releasing equity for a stair lift or other important need you have.
Common Equity Release
One of the most common forms of equity release is the lifetime mortgage. The lifetime mortgage is a loan that is secured against a property. This mortgage does not require any repayments during the lifetime of the homeowner. It is normally repaid when the homeowner dies or is no longer capable of remaining in the property. The property is then sold to repay the initial loan amount and the accumulated interest.
There are different types of lifetime mortgages. It is important to know what they are to make your educated decision. The first option is a lump sum or regular equity release. This is exactly as stated, you obtain a loan, you make no repayment equity release, and compounded interest and the principle balance is due at death or when you move out.
The next choice is a drawdown mortgage where you have a lump sum payment that is smaller than a regular lifetime mortgage. After the lump sum you are able to withdraw from an account as you wish. The amount you can withdraw each time can be as low as 2,000 pounds. You are only charged interest for the money taken from the account. It keeps the interest lower and the principle repayment amount easier to repay. There is potential to leave behind an inheritance with this product.
Interest only lifetime mortgage is the outlier in the mortgage industry because it is slightly different. Rather than no payment you will make a payment of interest. You pay interest each month in order to keep the principle balance the same as the lump sum you withdrew in the beginning. This type of loan requires disposable income and does not work for everyone. It is the best to guarantee an inheritance for your beneficiaries though.
Enhanced lifetime mortgages might be on to consider if you have mobility issues due to illness. While it is a bit cold to say it sometimes having an illness can help you secure a mortgage. The enhanced lifetime mortgage assumes life expectancy is lower than the average retiree, so a larger lump sum is given. The loan is thought to be paid back much earlier than the average life.
Using Lifetime Mortgages
The money obtained from lifetime mortgages can be used for many different purposes. It can be used to meet the daily living expenses of the homeowner. It can also be used to finance a vacation or to purchase a dream car. One of the most common usages of the money obtained from lifetime mortgages is home improvements. Releasing equity can be used for redecorating, or for obtaining a new suite or kitchen. However, for some homeowners who have become disabled and are no longer able to use their entire house, releasing equity for a stair lift is one of the best applications for a lifetime mortgages.
A disability can make it very difficult for homeowners to be able to fully use their entire house. They may not be able to get upstairs. A stair lift gives them the mobility that they require to get upstairs and to be able to fully utilize their whole house without having to rely on other people.
When releasing equity for alterations to a property due to a disability, homeowners should always check with the local authority first as that they may be some entitlement to local government finance to assist. It is also advisable for homeowners to consult an equity release adviser to make sure that they are choosing the right equity release plan that will be able to meet their needs and requirements. Don’t suffer in silence if mobility at home is an issue as there are solutions, with equity release schemes being one of them.
Releasing equity for a stair lift is a great way to make your life easier; especially, if financial assistance from a government programme cannot cover the entire amount. Make sure to speak with your family before you take out this type of loan to ensure there are no other alternatives.
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