Equity release is a method of acquiring a stable income source from the capital value of your home while you still live in it. This type of loan is usually paid to the provider after the homeowner passes away or moves into long term care. Equity release is a perfect option for people above 55 years of age, who have locked their assets into their property and need to use those funds during their retirement.
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Some features and facets of equity release
Equity release can be of two different types – lifetime mortgage and home reversion.
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Lifetime mortgages
This type of loan is generally used to create a retirement fund for the borrower to spend on enhancing retirement lifestyle. The money is usually paid as a lump sum amount.
Interest is added to the capital initially borrowed during the loan term. This amount is paid when the owner moves to a retirement home or sold off after the borrower passes away.
The debtor retains 100% ownership of the home together with other responsibilities and costs of maintaining the property. However, the only negative aspect of a lifetime mortgage is that the accumulated capital and interest compounds yearly, thus potentially reducing the inheritance that will be passed onto the beneficiaries. Nevertheless, with property values hopefully rising over the years, this roll-up of interest can offset to some degree the interest accumulation on equity release schemes.
The final outcome of the equity release scheme is that the lender will require eventual repayment of the scheme from the sale proceeds. However, after this event the executor of the estate will have between 6-12 months in which to finalise this repayment. This should provide enough time for a adequate sale price to be achieved for the estate & hopefully provide a surplus capital amount over & above the equity release balance.
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Home reversion plans
With this option, the homeowner sells the whole or a fraction of the property to a reversion company. The reversion company offers a tax free capital sum or a regular income to the borrower,. Moreover, borrowers can continue to stay in the home till their death even if they do not own it any more. They are provided with a lifetime tenancy agreement which allows them to remain in situ until they either die or move into long term care.
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To discuss the advantages & disadvantages of lifetime mortgage or home reversion schemes please contact Mark on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk.
Alternatively, visit our website at http://www.equityreleasesupermarket.co.uk
Tags: equity release, equity release schemes, home reversion, home reversion schemes, lifetime mortgage schemes, lifetime mortgages
