Are you in retirement and looking for an additional source of income? Is your monthly income from your pension plan just enough to meet your daily living expenses? Do you want some extra cash to go on that dream vacation or to purchase your dream car? If you own a property of a certain value, you can use that property to obtain a lump-sum amount or a fixed monthly amount from an equity release provider through equity release schemes.
What exactly is equity release? Equity releases are schemes that allow retired home owners to obtain a lump-sum amount or a fixed monthly amount by releasing equity from their property. Lifetime mortgages are one of the most common equity release schemes. A lifetime mortgage is a mortgage or a loan that is offered to retired home owners using their property as collateral. The great thing about the lifetime mortgage is that the home owner is not required to make any payments for as long as he lives. Upon the death of the home owner, the property is sold and the equity release provider is repaid for the capital loan amount as well as the accumulated interest.
An interest only lifetime mortgage is a special type of lifetime mortgage that gives home owners the choice to make monthly interest payments. The advantage of an interest only lifetime mortgage is that the amount that will eventually have to be repaid will not be so much. In most cases it will be equalled to the capital loan sum since the interest will be paid on a monthly basis and will therefore not be allowed to build up and thus increase the amount that needs to be repaid. In fact the only way the last payment is more than the capital balance is if the interest rate for the last month has not been paid.
More than one type of lifetime mortgage exists. It is your duty to search out the most beneficial option among this type of loan product. You have a variety of different online websites to check pricing and package details. Look for information on drawdown, enhanced, and roll-up. There is also a rare option of fixed lifetime mortgages.
Another common equity release scheme is the home reversion scheme which makes it possible for home owners to sell a portion of their property or their entire property. They will however be allowed to continue living in their home for as long as they want to or are able to. The moment that they are no longer able to care for themselves and need to move into professional care their home will be sold to repay the equity release provider.
In this situation all homeowners living in the property and over the age of 65 can be named in the home reversion contract. If named in the contract they are also written into the lifetime tenancy agreement. This written contract states that the person(s) occupying the house may remain rent free for their lifetime or until they move. This protects you if your spouse or civil partner dies before you or needs more care. You can remain in the home if you wish or sell it to move with your partner.
The age for home reversion is different than lifetime mortgages. Numerous providers allow a lifetime mortgage to begin at age 55. This is ten years more that you can gain under the lifetime plan. Of course, since retirement is being extended well beyond 65 due to economic constraints this may be irrelevant to you. You should be aware there is a cap in age for both products too. Typically, 75 is the cut off age for mortgages. In rare instances products for home reversion have been found for those of age 80, but nothing has gone beyond this age.
So, if you are a home owner in need of extra cash, consider equity release schemes. You have a tough decision ahead of you regarding your retirement and how to fund it. Explore all your options including downsizing your home, which lowers your monthly expenses. It might not be ideal to give up your home, but it could alleviate the need for so much cash during retirement.
Speak with qualified advisors regarding equity release schemes before you decide on any one product. With so many financial products and terms it is helpful to get a second opinion before you commit. Your family should also be a part of your decision since your choice can directly affect their inheritance.
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