Equity release is a system where you can access cash that is tied to the value of your home, if you’re above the age of 55 years. You can receive the money that you release either in small installments over a period of time or as a lump sum or a combination of both. It is also important to note that you don’t need to have fully paid for your home mortgage to get access to equity release.
With that said, here are 4 things you should know about equity release:
#1 The Aspect Of Downsizing
One major factor to know about equity release is the aspect of downsizing. If it is possible tor you sell up your home and move into a smaller house than live on the extra money that you’ll have left, then this would be a good approach to take up.
Again, it is important to keep in mind that if you’ve lived in this house for many years and have formed many ties with neighbors and friends, you could consider downsizing within the same area not so far off. You’ll need these friends close to you.
There are costs involved in downsizing such as removal costs, agent fees, and stamp duty. As such, you’ll need some bit of money for the initial financing of this option.
#2 The Aspect Of The Lifetime Mortgage
One of the most popular forms of equity release is the lifetime mortgage that won’t be paid off up until you die. This mortgage allows you to release part of the equity that is tied in your home. This mortgage is available for people who are above the age of 55 years. This loan is paid in full when the last person living in the home goes into care, sells the home, or dies.
#3 The Aspect Of The Home Reversion Plan
This form of equity release is available for people aged 60 years and above. How it works is that you receive a tax-free lump sum for a predefined portion of your property below the market value. You then live in the home rent fee up until you die.
When the property is sold, the money is split on the basis of the percentage you own and what the reversion company owns.
If you had sold the entire home to the reversion company, they will get all the proceeds from the sale. If you had sold just a part of the home, then the reversion company gets their share and your inheritors that are alive get the other share.
#4 The Aspect Of The Equity Release Council
When taking up equity release, ensure that the company you approach to facilitate this process is a member of the Equity Release Council. Members of this council are obliged to promise you a guarantee of no negative equity hence your estate won’t owe more than what your home is worth.
These four things are important to know about equity release. For more information on how to go about the process of equity release with good professional guidance, check out responsibleequityrelease.co.uk.