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Equity Release – An Alternative Means To Generate Funds

By Mark Gregory on September 20th, 2010

Equity release schemes offer optional loans to homeowners who wish to use their property as a source of income generation after their retirement. It is a type of flexible mortgage that offers tax free cash to homeowners secured against the current market value of their home.

 

Equity release schemes are available in two formats – home reversion or lifetime mortgage. If you are retired, over 55 years of age and own a property with a good market value, lifetime mortgage equity release scheme could be the ideal option for you.

On the other hand, a home reversion equity release scheme could be attractive for different reasons. It is only appropriate for homeowners above 70 years of age & is the only scheme where you can guarantee a specific inheritance for your beneficiaries. This can be useful if you have a specific attitude that you wish that at least some of your residual estate will pass to someone after your death.

 

With equity release schemes, you can either get the loan amount as a lump sum or in the form of monthly payment. Equity release schemes are fully regulated mortgages and as such come under the scrutiny of the Financial Services Authority (FSA). This ensures that you have full protection & recourse should inappropriate advice be given.

In addition to the protection offered by the FSA, you also will require the services of an equity release qualified solicitor. Upon processing your equity release application, your solicitor will be required to sign a SHIP (Safe Home Income Plans) certificate. This will confirm that he/she has discussed your requirements & noted that you are happy & fully aware of the equity release scheme & its implications.

 

What if the value of the property falls?

If the value of your home drops, this will also affect the remaining equity in your property & have the knock on effect of reducing the amount your beneficiaries receive. The final equity release balance will be repaid once the property is sold after the homeowner passes away or moves into care. Nevertheless, you do have the assurance of the ‘no negative equity guarantee‘. This ensures that at final repayment, should the equity release balance be higher than that of the property value, the lender will receive no more than the property value.

 

All equity release companies have to provide a Key Facts Illustration (quote) to confirm the set up & associated costs including surveyor charges, legal charges, application fees and redemption charges. This document should always be discussed with a qualified equity release adviser who can explain the features & benefits of the scheme.

 

If you wish to request an equity release quote, contact Equity Release Supermarket on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

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