Are you retired? Do you own a home? Are you finished or almost finished paying the mortgage on it? Do you need an extra source of income to help meet your daily needs or to do the things you have always wanted to do? If your answer to all of these questions is yes, equity release schemes can be the solution that you have been looking for.
Firstly, equity is normally defined as the difference between the value of your home and the total amount you owe on it. In your case, you may have a lot of equity in your property due to the fact that you are finished or almost finished repaying your mortgage and at retirement age. Equity release schemes are the vehicle which facilitates the releasing of equity from your home by way of securing a loan to the title deeds of your property.
The advantage of equity release is that the money which you receive is tax free and can be used to finance anything of your choice. This is what makes it different from other forms of loans. The two main types of equity release schemes are the home reversion and the lifetime mortgage.
The home reversion scheme allows you to sell a part or your entire property to an home reversion provider. This form of equity release is only available to people with the yongest applicant being over the age of 65. You might be wondering what the difference is between selling your property to a normal buyer and an equity release provider. There is one major difference. When you sell your property to a normal buyer, you need to relocate and possibly pay a rent. However, if you sell your property to an equity release provider, the provider allows you stay in your home until you die or until you are no longer capable of taking care of yourself and can no longer remain in your home. There is also NO rent to pay so it can certainly alleviate your finances.
The lifetime mortgage is now the most popular form of equity release scheme. It allows you to use your property to obtain a loan, like a residential mortgage. The difference between obtaining a normal mortgage and a loan from an equity release provider is that the equity release provider does not require you to make any repayments for the rest of your life. When you die, your property will be sold to repay the loan. There is however the option for the ownership of the property to remain within the family, should the family members raise alternative finance, such as a buy to let mortgage, which can then repay the equity release company.
In order to qualify for a lifetime mortgage you only need to be 55 years old and your property need to have a value of more than 60,000 pounds. These schemes are growing in demand as the older generation understands the importance of quality of life in retirement.
