Through equity release, you have a means to retain the use of your home, and at the same time, generate either a lump sum of capital or a steady stream of smaller sums which arrive in the form of an income. In order to obtain this kind of loan, you will need to visit a reputable equity release specialist to discuss what kind of programme suits your requirement. You may also want to use available tools like the equity release calculator.
Defining Equity Release as a Concept
Popular with senior citizens, equity release plans allow you to borrow what is essentially the value, or part of the value, of your house. This income needs to be repaid, usually only after death, and different kinds of equity release plan will need to be paid back with various forms of interest.
Equity release provides senior citizens with a steady and tax free income, founded on the value of their home. In this sense, it appears a useful brand of loan to take.
However, there are pitfalls to the process of repayment. While the loan itself is not taxable, it will accumulate interest and depending on the values of property and on the methods of repayment, it can completely absorb any estate you were hoping to leave to children and loved ones.
Types of Plans Available
As stated there is more than one choice you can make to find financial assistance into your retirement. Mainstream loans are not a possibility since you need to make a repayment each month which includes interest. For this reason you have home reversion or lifetime mortgages.
Home reversion is not a loan, but an actual sale of all or part of your house. It means giving up partial control in return for tax free cash you can use. For many this does not sit well. They would rather retain ownership until the very end.
This is why lifetime mortgages have gained in popularity in the last several years. Lifetime mortgages leave full control of the home to you as long as you take care to keep it in reasonable shape. You are able to remain in the home until you die or decide to sell it and move. In some cases you can still sell the home and simply move the lifetime mortgage to the new property. However, typically at this stage many are heading for a retirement facility rather than another independent property.
Under lifetime mortgage you have:
â¢ Lump sum or roll up
â¢ Interest only
â¢ Enhanced/Impaired Life
â¢ Voluntary Partial Repayment plans
A lump sum lifetime mortgage provides you with a lump sum of cash to use as you desire, tax free, with interest that rolls up into the loan. In other words, the interest compounds for the life of the loan, but you make no interest payment.
A drawdown equity release is designed to offer a smaller lump sum in the beginning with the possibility to withdraw from an equity release account throughout your retirement years. Interest still rolls up into the loan; however, it does so based on the actual money you use and not on the full equity available.
Enhanced or impaired lifetime mortgage is a lump sum with roll up interest; however, it is a larger sum on the basis that your life will expire much earlier than the average retiree. In this instance having an illness or shorter life expectancy is a positive thing, but only if you need more funds immediately.
Interest only is like the traditional product in which you do make an interest only payment. It is the only lifetime mortgage that requires a monthly payment. It leaves the principle balance the same at the end of the agreement, but at least it does not roll up interest.
Voluntary partial repayment plans are the new breed of flexible equity release schemes. Both Aviva & Hodge Lifetime offer the facility to repay optionally upto 10% per annum of the original capital borrowed with no 828-648-9895.
As you can clearly see it is important to use an equity release calculator and advisor to determine the best plan for you.
Calculating the Affordability
In order to determine how much money can be got out of your home, or whichever asset against which you are borrowing, you will need to talk at length with an equity release specialist. Or, at least, this was your only option in the past. Today, however, you can simply log onto the internet and search for an equity release calculator which will be able to give the maximum available sum.
Additionally, the equity release marketplace online has comparison tables which help you compare equity release schemes on interest rate & provide valuable details on qualifying criteria for every scheme. Visit sites such as Compare Equity Release.com to ascertain this information.