What is the reason I should release equity from my home?
You can make use of the money from an equity release to do anything from enhancing your property or gifting an early inheritance, or to clear the loan (but be aware that there could be better methods to obtain money). The cash doesn’t have to be returned until the homeowner who was last who is listed on the deeds dies, or is placed in the long-term care of a residential facility.
If you own a cherished family home that you do not want to sell , but you require more cash to retire such as a equity release may be the solution for you.
Different types of equity release
There are two options for equity release such as either a life-time mortgage or the home reversion plan.
With a life-time mortgage, you are able to secure funds against a percentage of the value of your home. There are generally limits on the amount you are able to take out. Similar to other loans, there is an interest charge on top of your mortgage however, you won’t have to make payments until you die or enter permanent long-term health care. Following that, the amount borrowed, plus interest, will be paid back with the sale of your home.
The home reversion strategy differs from other plans in that you’re selling your portion of your property typically at a price significantly lower than its value. There aren’t any payments to make and the amount to be paid back will be settled after the house is removed from the market.
If you’re considering the use of equity release to gain access to the funds that are locked up inside your residence, it’s important to understand the basics of how much you could release and what options you have. We recommend using the equity release calculator from the Equity Release Report. It’s a no-cost tool which requires no personal details to use. It provides you with an estimate of how much money you may be able to release, based on factors such as your age and value of your property. Additionally, you can get an idea of how much additional you can receive when you are eligible for higher rates for medical reasons. Give it a try and see what you could possibly be able to get.
What is a lifetime loan?
A life-time mortgage may be considered the most well-known kind of equity release. With a life-time mortgage, you will still own your house while borrowing money that is secured by it.
The lifetime loan is designed throughout your life without monthly payments. Interest is charged based on the amount you pay and is typically fixed for the rest of your life.
The types of life-long mortgages:
A lump-sum: You receive a tax-free, one-time lump amount from your home. You do not make regular payments however, the interest is paid to your loan. In addition to that initial amount, is due after the home is sold.
The drawdown: You agree the total amount you are able to take out through the equity release service. You then can release an initial amount, and then keep the remainder in an interest-free reserve that can be accessed by installments.
Flexible options are available when you choose to take your equity out in lump sum, or through the drawdown option, there will be a range of features that are flexible and could be offered. You can choose to make repayments on your own typically up to 10 percent of the initial amount of money borrowed in a year or pay the interest every month. An equity release advisor will be able to inform what options that are available.
Things to take into consideration when you are considering a life-time mortgage
How much can you borrow?
The amount you are able to be able to borrow is contingent upon your age as well as the value that your house is worth. The more advanced you get you are, the more money you can let go, usually up to a 60 percent of the property’s value. It is important to talk to an expert regarding the various options that are available, as these may differ between different providers. In some cases, how much you are able to borrow could be affected by your health condition and the presence of any medical issues.
Do you want to pay it in one lump sum or not?
It is possible to take the mortgage amount by lump sum or in smaller, regular amounts. The lump sum could appear to be the more appealing alternative, but if you don’t really require the money in one lump sum it is better to take it in smaller chunks. Because you only have to pay interest on the amount that you actually take out. Don’t use the money until you’re in need of it.
Are you willing to pay any interest?
If you’re not required to do so, you can opt to pay part of the interest in installments in order to lower the total cost of your the care of a nursing home, or to keep the worth of your estate for the beneficiaries you leave behind when you pass away.
The interest rate for loans
Compare rates when searching for the perfect permanent mortgage. Based on the length of time you plan to remain in your house for the duration of your stay, this could be an enormous difference as the interest rate can increase substantially over a long amount of time.
Find a zero-negative equity guarantee
No-negative equity guarantees mean that in the unlikely case that the property’s worth has dropped to the point where it’s not enough to pay off the loan the estate (and consequently your beneficiaries) will not be held accountable to cover the difference. Instead, the difference will be taken out of the property.
Do you think you will move back in the the near future?
If you’re thinking you’ll move to a new residence in the future and after taking out life-long mortgage, you must be cautious. A lifetime mortgage typically covers you until you pass away or are placed in long-term care facilities, however it’s possible to transfer to a different permanent residence. You’ll need to speak to the mortgage company you have with your lifetime and ensure they’re satisfied with the house you’re planning to move to because it’s the house that will now be secured by the loan.