An equity release is a way for people over 55 to take advantage of the equity they have built up in their homes. They can still live in the home but are able to use the cash during their retirement. There are advantages and disadvantages to doing this..
With an equity release mortgage, you are allowed to stay in the home until you die or move to a facility for long-term care. In the meantime, you are paid the cash value either in one lump sum or in payments. There are two basic types of equity release mortgages, the lifetime mortgage and the home reversion plan..
In the case of lifetime mortgage, interest is charged to the amount of the loan given. This is added to the principal, rather than paid each month. Therefore, the amount to be repaid continues to increase. Loan and interest are repaid upon your death or move to a facility, at which time the home is sold..
Because you cannot predict when you will die, you have no way of knowing how large the amount due will be. The interest on the loan is compounded so that the loan amount can conceivable grow to the point that there is little or nothing to pass on to your heirs. However, there is a no negative equity guarantee that ensures that the amount owed can never be more than the amount for which your home sells..
In the case of what is known as a home reversion scheme, you sell your property, either partially or in full, while you are still alive. However, you are permitted to continue living there until you die or move to a long term care facility. You are not assessed any interest. At the time of your death, the reversion company will sell the home and keep whatever profit is generated. Again, because there is not telling when you will die, you will not receive the full current price for your property..
Anyone 55 or over can qualify for a lifetime mortgage. Home reversion schemes generally require you to be 65 years of age or older. You must have either no mortgage or only a small one. .
All equity release schemes are under the regulation of the Financial Services Authority (FSA). Only advisers who have passed specialist exams may provide equity release advice to you. These laws have been put in place to protect you..
If you think that an equity release might benefit you, take your time and research your options. Be sure that you understand all the effects that this type of mortgage can have, both on you and your heirs. Then be sure to work with an expert who is reputable and can refer you to satisfied clients for their input.
Article Directory : http://www.articlecube.com
