Equity release on one's property is a great way of lending that was implemented to specifically assist pensioners. If you are over a certain age and have assets but no cash, then getting an equity release on your property could be the perfect solution for you.
How it works is that you borrow money that is secured against your home but you dont have to be weighed down with monthly instalments like other loans & mortgages. You can receive the money in a lump sum or in irregular payments in the future depending on your preference. Once you pass away or when your home is sold, the amount you owe will be settled with the money from the property sale. There are different ways to equity release on property that you can choose from such as a capital payment or income that will suit you and your needs. Some of them include:
Lifetime mortgage - You take out a loan that is paid to you in a lump sum. The equity release provider charges you interest which instead of being repaid on a monthly basis, is instead added to your mortgage balance each year. The entire loan and all interest will only be payable once your house is sold or in event of your death or moving into long term care.
Drawdown lifetime mortgage - You take money only as you need it. The lender provides an initial lump sum hich is usually suitable for your immediate needs. A further cash reserve facility is created which allows you to withdraw cash from it whenever you require further funds. Interest is accrued only on the amount drawn and the loan is repaid in full once your house is sold or in the event of your death or moving into long term care.
Interest-only lifetime mortgage: This is perfect for those who want to have a bit of money left over each month & can afford to repay the interest charged. This is more suitable for people who wish to protect their inheritance, once their house is sold. You will make monthly repayments on the interest so that when the loan is repaid, the balance will be the same as it was at the outset.
Home reversion - You sell your house or parts of it to an equity release provider for a cash lump sum and a lifetime lease to remain in your home until you pass away.You can seel any percentage of the property, even upto 100% which effectively transfers ownership of the property to the home reversion provider. The advantage of reversion schemes is that you can guarantee an nheritance for your children by only selling a percentage. The amount you haven't sold will pass to your beneficiaries once the hosue is sold.
It is usuually advisable to opt for monthly payments of the cash you borrow in releasing equity on a property because the final balance will be much less than when taking a lump sum & allowing it to roll-up.
The fact that you have the option of not paying monthly repayments also means that you will not be burdened with that kind of debt in a time of your life that should be relaxing and enjoyable.
The choice is yours, but always consult your children & families first. If in doubt, always call an equity release specialist such as CompareEquityRelease.com on 0800 678 5169.
