Before we look at this subject let us start be clear by saying that this article in one way contains advice about whether to get an equity release scheme on your home or a property. This is simple a piece about what it is and if you are thinking of getting any advice then I would immediately direct you to contact an expert at Equity Release Wiltshire. There are many on the market but https://chilvester.co.uk/equity-release/ can give you a start and might be one option for you to consider. Whatever advices you seek make sure they are part of the Equity Release Council.
Equity release is a relatively simple idea and there are two main forms of it. It can be taken out on a property that ideally has no mortgage on it. You will see many adverts telling you to “unlock the value in your home” and this is true to some degree as if you have been in the property for several decades it is very likely that you home has increased in value by a very large extent. It is this value rise that will be unlocked. What we are essentially looking out is a mortgage or loan being taken out on the property that put money in your pocket. There are many reasons for this one of them being that as society lives longer the pension schemes both state and private are not able to sustain us through the years. If a sudden bill for repairs come in or some other life time event then this appears to be the option that many are choosing to do. So, for information only, what types are there?
- Lump Sum. As the name suggests you get a sum in full and up front. This is then slowly paid off. You still own your home and the amount is secured against it. This is general used of repairs, maintenance and purchases.
- Lifetime Mortgage. At present this is the most frequently used type of equity release plan. Whilst it is a mortgage you do not make payments against it. Interest is added yearly to the loan. Bluntly put, when you die or sell it the amount is reduced from the profit that’s made. This will reduce any inheritance that your next of kin and beneficiaries form your last will and testament will receive.
- A Drawdown. In this scenario you take a loan for example £40,000 but it is released in stages or tranches say £10,000 over 4 years. The amount that comes to you accrues the interest not the full amount from the start so you can stop it if you feel you have enough.
- Reversion plan. This is proving to be a popular way to fund retirement. In this type you sell a percentage of your home. The lender legal owns that part exerting some control in what you do with it but again you pay no interest. Again when the property if you move or you die the lender gets a percentage from the sale.