A definition of ‘Equity Release’ is the means of releasing equity from your property and converting it to tax free cash. The cash released comes in either a one off lump sum, or can be released via irregular payments in the future. You are able to keep ownership of your home and live in it for the rest of your life with an equity release loan.
Equity release schemes are only offered to homeowners who are of 55 years and above and who would benefit from having some extra cash to help their finances in retirement. The money that is released is tax free and can be spent however you wish.
The benefits from an equity release loan is not just that you get a cash injection, but also that you do not need pay any monthly payments and you are able to remain in your home. Also it could be a huge life saver for those over 55 years. This is because the money that is released can be used in many ways.
Utilising the Equity Funds
The equity release can be used to making home improvements, for example building an extension, getting a kitchen fitted or just general improvements. The money that you are then spending goes straight into improving the home and thus increasing the value of the property. One of the biggest debts that a homeowner has is the monthly repayments for their mortgage; by releasing equity you will be able to clear your mortgage and then benefit further with an extra cash lump sum. You can also improve your lifestyle and retirement by releasing equity and spending the money on some luxury’s that you may not have had before such as a cruise.
With an equity release loan you can avoid paying too much inheritance tax that will then work in favour of your beneficiaries. This is because anyone who passes away, that owns an estate worth more than £325,000 will need to pay inheritance tax. By freeing up the equity in the home, you will reduce the tax. In retirement many debts and bills may still need to be paid off so you can be debt free. An equity release can free up the money that you may need to pay off these debts.
Another Home Equity Option
Equity Release Loans are one option which are also called lifetime mortgages; however, you have a secondary option that is not a loan at all. The outcome is the same because the home is sold, but it is in a different manner. Home reversion allows you to sell a part of your home to a specific financial entity. This company will provide you with a valuation of your home and then determine a percentage they will pay for the portion of the home you want to sell. This lump sum is not returned to the financial company because it was yours for selling the house. At the end of the agreement you sell the house in full and receive the rest of the funds. If you live in the home till death then this money is given to your beneficiaries. It is one way to ensure that your family has some help too in inheritance. The drawback is that home is sold and there is only one way to ensure that it remains in the family. Your family or you would have to pay a larger amount to the company in order to buy the home back, which is often not feasible.
Lifetime Mortgage Choices
Do not forget that there is more than one lifetime mortgage equity release option. You have drawdown in which you take monthly instalments or irregular instalments of money from an account. The funds you remove are charged interest. Rollover offers a lump sum with compounding interest. This is a quick one shot option thus you want the house valuation to be rather high.
Interest only lifetime mortgage options allow you to pay on the mortgage for interest only. The principle remains the same throughout the loan, but it only works if you have disposable income to pay on the interest. Lastly there is an illness style lifetime mortgage in which your health is factored in to provide a larger lump sum at the outset than another healthier person might be able to obtain.
An equity release loan can save the day and release money for you so that you can have a relaxed retirement and to be able to do the things that you have wanted to do. It can also help in protecting any potential inheritance and many other matters additionally.