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Getting a home equity release from the investment in your home makes good business since. It is a way for homeowners over the age of 55 to access the value accumulated in their property to generate funds for whatever reason they want. One of the equity release scheme options is called equity drawdown. To understand what this means we must first understand equity. All of the years you have been working hard and paying on your house have finally paid off. Thanks to increasing property value, additions and improvements made since purchase and the economy, the value of your home exceeds what you originally paid for the property. Even if there is a residual amount left unpaid on a mortgage, there is still equity in the home. To calculate or estimate the amount of equity you must know the current market value of the property. This is not the amount for which the house is assessed or appraised. This is the sale amount of money you would expect to receive from a buyer if it were to sell today. If there is no outstanding mortgage or lien on the house, that sale amount represents the equity. If there is a mortgage or liens, simple subtract that total amount from the fair market value and that sum is what the equity would be. Equity represents your investment in the property. It is your money saved in the form of property interest. The equity release amount is calculated on the equity, the age of the homeowners and occasionally other influencing factors. Equity Drawdown Drawdown equity release schemes are plans that do not release all of the equity in a single lump sum. The plan provider grants a total amount based on the calculated equity release, but immediately dispenses only the amount requested by the homeowner. The rest of the funds are banked and available for future access. Usually there is a minimum initial withdrawal amount of 10,000 pounds, however; this is individual company policy and may vary between lenders. Pro’s and Con’s Equity drawdown a great plan if one doesn’t require the total amount upfront. Interest and fees are only paid on the amounts received. Additional charges will be applied on the total when additional funds are withdrawn. Overall, it saves money over the term of the loan. There are generally no additional filing fees for subsequent withdrawals. Depending upon individual loaner’s policies, there may be no time requirement between withdrawals or an established time may be stipulated. The maximum is usually a month waiting period if at all. If the intention of using an equity drawdown is to provide ongoing regular income supplementation, this may not be the best plan. There is a limited balance that when extinguished ends your income plan. In addition any applied interest rates will vary calculated at the set rate at the time of additional withdrawals. If the rates are better, you actually save money. If rates have gone up, the total cost of the equity release is increased.
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