Several individuals and couples have been known to financially benefit from equity release solutions. These solutions serve as schemes to help retirement age individuals use the equity already built into their property as a source of ongoing capital or income. This money can be used to help sustain monthly expenses, pay off debts or a whole host of financial measures to help people in retirement.
There are two main types of equity release schemes; home reversion plans and lifetime mortgages. These two types of lifetime mortgage solutions can serve to help retirees stay in their homes while also maintaining and potentially increasing their monthly income & lifestyle.
Let’s have a look more closely into the two main types of equity release schemes the first of which is the home reversion plan. With home reversion plans, the homeowner agrees to sell a portion of their property in exchange for a lump sum payment. Upon the death of the homeowner or their spouse, the lender receives the pre-agreed percentage of the home sale. This amount remains the same, even if the property value of the home has at all fluctuated.
However, lifetime mortgage solutions exist that are a second & possibly better alternative for pensioners and work a little different from home reversion plans. Through this process, the homeowner usually takes out a payment free mortgage in order to raise a lump sum that they can spend whatever they choose. Upon the death of the homeowner or their spouse, the interest accrued on the loan is repaid back to the lender from the sale of the property.
What is most important to remember with lifetime mortgages is that the interest is usually higher than that usually associated with residential home loans. The reason being, is that lifetime mortgage interest rates are fixed for the rest of the applicants life. Mainstream mortgages never offer this security. The interest levied by the lender is simply left to compound over the course of the equity release mortgage, meaning that the amount can be quite substantial once the home is sold.
These two kinds of equity release solutions are most worthwhile for certain demographics of our population. The home being used must be of a certain minimum value, which can differ among lenders. The homeowner must also be at least 55 years old & this applied to the youngest applicant. Therefore, if one of the parties on the deeds is under 55, then no application can be made unless the house is transferred into the older persons name.
Lastly, the homeowners that choose to participate in the two lifetime mortgage solutions are those that want to remain in their homes indefinitely. For those that fit this criteria, equity release solutions can be a reliable way to increase monthly income and help pay off debts or sustain a quality of life to which the homeowner wishes to be accustomed.
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National Equity Release Pension Conference, Bath Street, Bakewell, Derbyshire, DE45 1BX.
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