Is equity release right for me guide, Money problems help, Home asset advice, Property finance
Do You Have Money Problems? Here Are Some Reasons Why Equity Release Could Help You Save Money
20 April 2022
After you retire, there are lots to look forward to, from seeing the world to spending more time with the grandkids, but how can you fund your golden years?
Retirement may provide you with more flexibility and time to spend on the activities and people you care about the most, but it’s still an expense.
John Lawson, an Equity Specialist, walks us through equity release by Daily Mail & why you should consider equity release to assist in providing the retirement you’ve always dreamed of.
What’s Equity Release?
Your equity is equal to the whole market worth of your property, less any mortgage you haven’t yet paid off.
In a nutshell, it’s the amount you’d receive if you sold the house for cash.
However, if you do not choose to sell your house, you may still be able to access a significant chunk of this money.
How Equity Release Works
Your age and the lender determine the amount you may release, but you can frequently borrow up to 60% of the value of your property.
The minimum house worth is £70,000, so this isn’t only for affluent mansion owners and might be suitable for most senior homeowners.
There are absolutely no monthly repayments with a lifetime mortgage, depending on the plan, and instead, the debt and interest owing must be paid if you move permanently into care or by death.
What Are the Different Types of Equity Release?
There are two types of equity release schemes, namely:
A lifetime mortgage is the most often used kind of equity release.
You borrow a lump sum in the form of a mortgage, which is eventually repaid through the sale of your estate, either when you die or when you enter long-term care.
The amount you may borrow is often between 18% and 50% of the entire value of the property – traditionally, the older you are, the more you can release.
A home reversion programme allows you to sell all or part of your property while retaining the legal right to live in it until you die or go into long-term care.
Depending on your preference, the money can be provided to you in either a single sum or as a recurring income.
Whether you sell your entire property or only a portion of it, you will not earn total market value, so keep this in mind while making your decision.
Some home reversion plans require you to be over the age of 60.
Is Equity Release Right for You?
Releasing equity from your house is a vast choice, and there are a lot of factors to think about before you do it:
- If you do not make interest payments, your mortgage costs might quickly climb, and your borrowing will be greater.
- Equity release can impact your tax situation and your eligibility for means-tested benefits such as income assistance and universal credit.
- When you release equity from your house, the overall worth of your estate decreases, reducing the amount of inheritance you may leave.
What Can You Use Equity Release For?
Equity release funds are tax-free and can be used for anything you wish.
The most common uses of equity release funds are: repaying mortgages and unsecured debt, making home improvements, supplementing income, purchasing properties, and helping your family.
Equity release may not always be the best option for everyone. It may influence your eligibility for government benefits and lower the value of your estate.
If you are choosing to release equity, take into consideration that it’s a significant choice, and you must research the scheme that’s best for you.
There is a lot to think about, so getting expert assistance is critical. This might come from a specialised adviser, a solicitor, or both to assist you in determining if it’s the best decision for you.
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