How Do Equity Release Schemes Work?

Equity release can be a way of freeing up cash if you are 55 years or older and if you own your own home.

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What Is Equity Release?

Companies offering equity release Malmesbury services, and others around the country, can allow you to unlock equity in your property and transform it into cash. This can happen in various ways, and you don’t even need to have a fully paid-up mortgage to take advantage of these policies.

There are many companies offering these services. Generally, you can either get a lump sum, request several smaller pay-outs, which will cost you in interest payments, or decide upon a combination of the two.

Companies such as https://chilvester.co.uk/equity-release/ can talk you through the options available, but in general terms, equity release can be a useful tool to raise cash, especially if you have no one who you want to leave assets to when you die or you want to make the most of the assets you have worked hard to amass.

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How Do the Schemes Work?

There are two kinds of equity release products: home reversion and a lifetime mortgage.

A lifetime mortgage is the most popular choice for people in the 55+ age range and involves your borrowing a proportion of the value of your home with a capped or fixed interest rate.

There are drawdown versions that allow you to pay off some of the interest, and this means that you can lower the cost. If you have this kind, you can release equity a portion at a time with a set limit agreed. The amount of interest you will be charged is then based on what you take and not on the total amount available.

A home reversion plan may be for you if you are aged 60 or over. More information can be found at https://www.moneyadviceservice.org.uk/en/articles/using-a-home-reversion-plan-to-pay-for-your-care.

In this case, you sell a portion of the property you own at less than market value. You get to live there without having to pay rent until you die. When the property is eventually sold, the value is split according to the amount you and your lender own.

In general, this means that if you choose a lifetime mortgage you will know what rate you are being affected by. Home reversion plans mean your lender will make more if property prices rise.

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