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Equity Release
Equity release is similar to taking out an equity loan, but the plan is more specific to helping out older homeowners turn some of their home equity into cash. Some of the options that older homeowners have for their equity release can in the form of income, or a lump sum or, sometimes, a mixture of both. It is important to be aware that schemes vary depending upon the financial institutions, and homeowners should always look at the fine print. Some schemes have a higher age limit, for instance 70 years of age, while others are more suitable for younger homeowners with longer life ahead of them.
There are two main schemes for equity release. One is called a home reversion scheme. With this scheme, you basically are selling all or part of your property to an investment company while you’re still living in the house. As a result, the company provides you with a lump sum or regular income for life. When you die, the home will be sold and the company will receive the proceeds of their part of the property.
Another common scheme is called a lifetime mortgage. With this scheme, you basically borrow your own money against the value of your home without interest. You will have to pay back either as a lump sum or in the form of regular payments.
According to a recent research, only one in ten older homeowners have released equity in their homes. Studies also show that many of these older people are becoming asset rich but cash poor. What that means is that these people live in a home that is worth a considerable amount and yet they are living meagerly on a limited amount of cash.
Today’s market conditions are ripe for equity release. With the reduce of funds in social security, inadequacy of personal and company pension provision, and longer life-expectancy make older people look for other alternatives for cash. Some of main reasons for people to get equity release are for home improvement, second-mortgage, as well as regular income and easy access to cash.
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