As Property Values Rise Equity Release Looks More Interesting
Over the last couple of decades people have seen the value in their homes rise by unprecedented levels. The longer you have owned a property the more this rise in value will be apparent. And people often include the value of their property as part of their overall capital. But while the value remains within the bricks and mortar, it’s not really capital that is accessible unless you sell the home and move somewhere smaller, or release some of the value through an equity release scheme.
Four Main Types Of Equity Release
The four main types of equity release include different types of lifetime mortgage. A lifetime mortgage is where you take out a lump sum of cash against the equity you hold in your home. This amount is not repayable until after your death and will be paid when the property is sold, along with the total amount of interest accrued on the loan, so the longer you have held the loan, the higher the interest payment will be. You can also take out an interest only lifetime mortgage, where you start interest payments immediately, meaning that only your initial loan amount will be repayable after your death. This can be more advantageous for any beneficiaries of your estate.
The drawdown mortgage is slightly different again, as you take smaller amounts of cash when you need them against the equity in your home. With this type of equity release, less interest accrues as you borrow money for shorter periods.
The other main type of equity release is the home reversion plan, where you sign over full or partial ownership of your home to the equity release plan provider. You receive a lump sum of cash and retain the right to live in your property rent-free for as long as you wish. The value for the percentage of your home that the provider offers will be less than market value to cover the period that you may continue to live in the house. On your death and the sale of the property, the provider recuperates its portion of the value in your home, including any rise in value in the intervening years.
You Can Get Free Equity Release Advise
and more information about equity release plans from Age Partnership, a company that specialises in financial services for the over 55s