Understanding Equity Release
If you’re keen to get your hands on some cash, you might be wondering what equity release is and if it’s something you could be eligible for. The process of equity release involves a range of products that allow you to access the equity in your property if you’re over 55 years old. The release of cash can be paid to you in one lump sum or, if you prefer, in smaller monthly payments, or even a mix of both.
There are two main options for equity release and these are lifetime mortgage and home reversion.
This method allows you to take out a mortgage on a property you own, as long as it’s your main residence but you retain ownership. Part of the equity you can keep separate to act as inheritance for your family after you die. You can decide to make repayments towards the mortgage or simply let the interest accrue. The mortgage and accrued interest are paid back on your death or your moving into care. For more information, contact specialists in Equity Release Wiltshire at https://chilvester.co.uk/equity-release/
This method involves selling all or part of your property to a specialist home reversion provider and in return receiving a lump sum or regular payments. You are able to remain living in the property with no rent to pay until you die, so long as you keep up maintenance and paying to insure it. As with the lifetime mortgage, you can ring-fence part of the equity to save for inheritance purposes. When the plan comes to an end, your property is sold, and the proceeds of the sale are divided according to the proportions of ownership agreed at the start.
Equity release is a good idea for many people seeking extra money but who don’t want to move home. There are some important considerations though:
- Bear in mind that equity release can prove more expensive than a regular mortgage. Lifetime mortgages generally charge a higher interest rate and the money owed can soon mount up if interest is rolling up.
- Concerning lifetime mortgages, there is no fixed date by which you must repay the loan. The rate of interest will not alter for the life of the loan unless you take on extra borrowing.
- If you’re tempted by a home reversion plan, bear in mind that plans often do not represent the real market value of your property and you won’t get as much as if you sold your home on the open market.
- Releasing equity in your home early on means you might not be able to rely on it should you need to later on in retirement, such as for long-term care.
- Money received from an equity release could impact your state benefits entitlements.
- Taking a plan that involves interest roll-up means less to pass on to your family after your death.
- You might be subject to early repayment charges should you change your mind.