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Equity release schemes allow older property owners to tap into their property’s value without necessarily having to sell it or move out. There are two types of equity release schemes namely: reversion schemes and lifetime mortgages. Deciding which one to go for is one of the many difficult decisions you’ll need to make once you choose equity release as a means of financing. Taking advice, both legal and financial is important. Extracting funds from your property impacts many aspects of your finances including your eligibility for other means of financing. You need to fully understand as well as plan for any unforeseen financial implications of equity release. Finding the best equity release on the market begins with locating the best home equity lenders. Lifetime mortgages are the most popular of all equity release schemes. This plan enables you to take out a mortgage or a loan on your home and in-return for a regular monthly income, a lump sum, or both. Even after receiving the mortgage, you continue to own the home. In this scheme homeowners aren’t required to make monthly repayments, with the debt you owe repaid only after your death or when you move into a care home. Home reversion schemes require that you sell either all or part of your property to a reversion company in return for a regular income or a lump sum, as well as the right to continue living in the property. When the property is finally sold off, you will receive a certain percentage of the proceeds. For instance, if you originally sold off 60% of the shares on your home, you will be eligible to receive only 40% of the proceeds from the sale. The best home equity lenders should lend equity release that carries minimum risk to the homeowner. The amount of funds a homeowner can raise through equity depends on two factors namely; the current value of your property and the age of the homeowner. If two people decide to take out equity release jointly, the plan will be based on the age of the younger partner. In the UK, home reversions and lifetime mortgages are regulated by the Financial Services Authority. The best home equity lenders are those who belong to the Equity Release Council. Equity releases from such lenders means that homeowners will never owe more than the value of their property, consequently no debt will ever be left to the state. Before you contemplate on equity release as a form of financing, it would be advisable to consider other less risky alternatives. For starters, as a pensioner, have you claimed all the benefits the state has to offer for which you are eligible? Have you thought of renting out that extra room downstairs? Consider liquidating other assets or borrow from friends or family. If you need funds to renovate your home, you may be able to get financial aid from local authorities. Many have found that the most effective way to release equity would be to downsize to a smaller home. Equity release schemes only work to reduce the value of the property you will be leaving behind. That said, it would be wise talking to your family about your thoughts on the matter. Who knows, perhaps you want to release equity to help the financially; either way, it would be wise to consult with them first before making your final decision.
About The Author Releasing equity from your property is a big decision and shouldn’t be done alone; consult with legal and financial experts, family, and friends.
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