In 2008, equity release schemes were in their heyday. Yet, it was also this year that retirees grew wise and realised the products had some serious flaws which helped to bring about the mortgage crisis and the credit crunch that followed. It was a hard time after the recession when the whole economy was churned out but the equity release schemes are gaining back in value in the market once again. Today, the mainstream mortgage market is led by equity release schemes.
Equity release schemes allow people to release cash without moving out of their home. They have all the rights to live in their home as long as they are alive or plan to shift permanently to a long term care facility. Recent statistics have shown that there is a substantial increase in written equity release business. This statistic has also revealed that more and more people are willing to release the equity held in their property to live their post retired life in their own ways.
The equity release schemes are specially designed for people over an age of 55 years. It allows them to release the equity held in their property without moving out of it. Equity release schemes help old people to fulfil their unrealised dreams using the cash that is otherwise held idle in their property.
The acceptance of equity release schemes is also increasing because of the various flexible options offered by the service providers. You could opt to pay back the interest regularly so that the interest doesn't accumulate with the principal borrowed. As an alternative, you could even opt not to pay any amount during your lifetime. In such a case, the property is sold to pay off the debt after your death and if any amount is left after the payment is done then it automatically passes to your beneficiaries.
You could even opt to take lump sum tax free cash from the equity release scheme or even secure a monthly income for the rest of your life. It also comes with an option wherein you could mortgage your property fully or partially depending on your individual cash requirement. Most of the equity release schemes offered today are specially designed to fulfil the modern lifestyle.
Naming the Equity Release Schemes
Now that you have had an overview it is time to look at the names of these products. This way when you begin comparing the products online and speak with financial advisers about potential options you are doing so with a keen understanding of them.
Interest Only Lifetime Mortgage: This mortgage is that interest only option mentioned above. You pay a monthly payment to ensure an inheritance, as long as you do not take the whole equity amount that is the house value.
Fixed Lifetime Mortgage: An older option is the fixed mortgage in which you and the provider determine a set interest to pay at the end of the loan regardless of the years you have left. This interest is attached to the principle balance and is paid when the entire balance is due.
Roll-up Lifetime Mortgage: A standard for the market, this option compounds the interest for the lump sum. Unlike the fixed mortgage your interest will keep adding up. Unlike the interest only mortgage you do not make payments. In the end with this mortgage you pay the interest that has accumulated and the lump sum balance you took initially. It can add up to more than your house value.
Drawdown Lifetime Mortgage: The interest will accrue on this mortgage like a roll up plan; however, you take a smaller lump sum at the beginning. You then have access to an equity account with your cash equity in it. This account can be accessed whenever you need it. You draw down more money hence the name given to this product. The interest you pay is only on the money you removed from the account rather than the entire equity available for you to use.
Enhanced Lifetime Mortgage: A relatively new product on the market is the enhanced lifetime mortgage. This mortgage is for people with illnesses that will cut their life short. It sounds cold, but actually it is meant to make your last few years easier by giving you a larger lump sum than is available in a roll-up or fixed plan option.
If this sounds like a good option you have a bit more research to do before making a final decision. You always want to ensure you are aware of the disadvantages of products as much as you are with the advantages. More Information regarding these pros and cons can be found at EnhancedLifetimeMortgage.co.uk.
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