Equity release can be a valuable financial solution for people who are 55 years or above. Equity release can also be known as lifetime mortgage or home reversion schemes.

These two forms of equity release schemes are specifically designed for older homeowners who need some extra money to supplement their pension or savings.

With the help of equity release schemes, you can unlock money from the value of your home or other property without moving. This financial product is perfect for older homeowners who have already paid off their mortgage or have only a small amount left.

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How do equity release schemes work?

If you own a property you can release some value of your property or home and get a lump sum amount of money. One of the best things about these schemes is that you can also get some of the money in the form of a regular income. After your death, the money which is repaid from the sale o the property sale. Primarily, the equity release lender is repaid first, with any remaining amount passing to your beneficiaries.

On the other hand, if you sell your home before you die then you can repay the money to the lender yourself. If you have decided to opt for an equity release plan then make sure that it also offers a no negative equity guarantee. This means that the debt amount must never exceed the value of your home. This feature will ensure that any outstanding debt is never passed onto your children or grandchildren.

It is always recommended to consult an equity release specialist company before opting for an equity release plan.

Equity release is a scheme which is specifically designed for homeowners who are above 55 years in age. If you are 55+ and own a property then you can release some of the equity & secure it against your property. One of the best things about equity release is that it provides tax-free cash which you can use to improve the quality of your life.

Due to the varying requirements for finance in retirement, current equity release schemes have been devised accordingly. The home reversion scheme is just one of the preferred schemes taken by homeowners these days.

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Home reversion scheme

This equity release scheme is designed in such a way that it allows you to sell a part of, or the whole property for an amount of money. Once you opt for this scheme then you have the right to live in your property for the remaining years of your life. This is due to the inclusion of a lifetime tenancy agreement. Although the property partly or fully belongs to reversion company, you are still allowed to live in the property until you die.

The amount of release depends upon your age and value of the property. Additionally, if you have any health issues then an impaired life home reversion scheme is available. Upon receipt of a completed medical questionnaire the lender can increase the applicants age for the purposes of re-calculating the amount of the release. The reason being that if any health issues do exist they can affect the life expectancy of the client.

The result of this being that the home reversion scheme may not have as long to run. Therefore, the reversion company can afford to release a higher amount for the same fixed percentage the applicant was prepared to sell. Alternatively, if impaired life is acknowledged by the lender, then the client could opt to to take the same tax free lump sum, but for a lower percentage ofthe property value.

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How does the lender eventually get their money back?

If you want to sell 50% of the value of your property, then your age will decide the amount of cash you will receive. Accordingly, if you die after 20 years then the lender will still get a 50% share based on the final sale value of the property.

Equity release schemes are a means to access the equity you have accrued in your property without having the need to sell your property. This scheme is great for people above 55 years of age & over.

With the help of equity release schemes, one can use the money invested in their home and not have to move out.

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Who can qualify for an equity release scheme?

If you are more than 55 years of age and you own a property which is your main residence, you can become eligible for equity release schemes. Due to the complexity of the products available & the implications on your beneficiaries & potential benefits, you should always discuss your specific situation with a professional financial consultant prior to opting for an equity release scheme.

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Why do people choose equity release schemes?

Different people may have different reasons to choose equity release schemes. People looking to earn extra money in their lives may choose to participate in equity release schemes. Elderly people looking for a tax-free means to access their money to help their children or relatives, can now also opt for these schemes. On the other hand, elderly people looking for a means to supplement their pension with additional payments while staying in their home can also opt for equity release schemes.

Equity release schemes can also provide elderly people with the extra money they need for their health care in their retirement years.

Regardless of the reason, when opting for equity release schemes, professional financial advisors can guide you through the entire process.

Equity release is a mortgage scheme that enables you to release the equity that is tied up in your property. Using equity release schemes, homeowners can release a specific  amount of money from the equity they have accrued in their home. The definition of equity is the difference between the overall asset value of your property and the remaining mortgage secured on your property.

This scheme is helpful for retired homeowners living on pension who are unable to meet their monetary requirements.

The amount of money people receive from equity release schemes can be used to cover daily expenses. So if you have taken retirement from work and need financial assistance to support your retirement & reduce financial worries, therefore considering an equity release scheme can be a good idea.

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The different equity release schemes

When considering equity release schemes, you can choose from lifetime mortgages or home reversion plans. Usually, these schemes involve complex calculations to determine whether it is a viable option. This is mainly because you need to balance different factors like the inheritance value of your home, and welfare and tax benefits against the overall amount offered when you release the equity. In order to make the entire process quick and smooth, choosing help from experienced & qualified equity release advisers is a good idea.

Equity release schemes are designed for people who want to release a tax-free cash amount against the market value of their home. If you own a property you can get a lump sum amount of cash to boost your finances.

Equity release schemes are divided into two main types such as home reversion plans and lifetime mortgages.

In today’s tough economic situation, people who are above 55 years of age can opt for an equity release scheme for various reasons such as:

• Home and garden improvements
• Holidays
• To clear debts and loans
• To pay an outstanding mortgage

If you are considering the scheme you should try out an equity release calculator which will help you to calculate how much money you get against your home.

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Factors which affect the amount of money you can release:

The amount of money you can release depends on various factors such as your age, property value, plan and also provider.

All equity release schemes are specifically designed for people who are above 55 years of age and below 95 years of age. Other than this, the value of your home must be worth a minimum of £70,000. Moreover, the property must be either freehold or a leasehold with a minimum period of 75 years remaining. You should also possess no or very little mortgage which must be paid immediately after the cash is received.

Before making a final decision, it is important to consult an independent financial adviser who will inform you about the current interest rates and other aspects about equity release. The adviser will factfind your current situation, assess your requirements & make a recommendation of the most suitable equity release scheme for you.