Things You Need To Know About Equity Release
If you’re over the age of 55 and out of work, you might be worried that there’s no way for you to get a cash advancement should you need it. Oftentimes, pensions and savings simply aren’t enough to cover the cost of living, and you might not be eligible for a bank loan if you don’t have a sizeable income. Besides, the monthly repayments on bank loans can be expensive, and that’s the last thing you need if you’re already struggling financially.
Luckily, there is another way to get cash if you’re in a sticky financial situation, and that’s by taking out a loan as part of an equity release plan. In its most basic terms, an equity release plan allows you to dig into the value of your home without having to actually sell it. You can visit Responsible Equity Release for detailed information and advice.
Lifetime Mortgage or Home Reversion
In the UK, two types of equity release plan exist that allow you to stay in your home and receive either a cash advancement or a something that resembles in income. The factors that affect how much money you can receive include your age, your home’s value, any medical issues, and the area in which you live in. Both types of plan don’t require you to pay any monthly repayments as the loan will be returned when your house is eventually sold.
The most popular plan is the lifetime mortgage because it means you’ll still be the full owner of your property. In addition, though the interest rate can mean your plan becomes costly over time, the amount that needs to be returned to your plan provider will never exceed the total value of your home.
The less popular option is the home reversion scheme in which you’ll essentially give away a percentage of your home for your plan provider to profit from when your home is sold. However, you should be aware that even if you only give up 20 percent of your home, the total cost after many years may mean that the provider actually receives up to 70 percent of the profits from the sale of your property.
Other Options and Considerations
The total cost of repayment is undeniably expensive depending on how long you’re on the plan for before your property is sold. That means you should consider how your loved one’s inheritance will be affected, and you’ll also want to make sure that should you need to move into a nursing home, you’ll have enough money to cover the costs.
A popular alternative option to equity release plans is simply moving to a smaller property so that you can keep the equity from the sale of your home and reduce your cost of living. However, you should be aware that you might not receive much cash if your mortgage hasn’t been paid off fully and stamp duty can be costly.
If you think an equity release plan is for you, make sure you seek independent financial advice before making your final decision.