Beginners guide to Equity Release Loans
Equity release loans can help you if you’re looking to raise a lump sum of cash for a costly purchase like a new car or home improvements, or simply consolidating some debts and credit cards to bring down those steep interest payments. Loan rates have never been lower than they are right now, and equity release loans are a safe and secure way to release some of the value locked in your house.
Types of equity release loans
There are three main types of equity release loans, and within each of these are various different plans.
- Lifetime Mortgage – the most popular type of equity release loans, these allow you to free a lump sum from the value of your property, with the amount released plus any interest accrued repaid out of your estate when you pass away or move into long-term care.
- Drawdown Lifetime Mortgage – very similar to a lifetime mortgage, but with added flexibility, as your money can be released in instalments, as and when required, which can reduce the amount of overall interest accrued.
- Home Reversion Plan – you give up ownership of part or all your property in exchange for a large lump sum of money but with these type of equity release loans you have the right to live in your house, rent free, for as long as you live.
How equity release loans work
With an array of different equity release loans offering lump sums and/or regular income, they all work on the same principle: they lend you a part of your home’s value in return for a share of the proceeds when you pass away or move into care. Generally you will need to be 55+, have little or no outstanding mortgage and own a property in reasonable condition.
The amount of equity you will be able to release depends on the value of your property and your age. There is no maximum age limit for equity release loans. In many cases, the older you are, the more cash you are eligible to release from your property.
Equity release loans can provide many benefits depending on your individual needs and circumstances so to help you decide which type of loan is best for you talk to an independent equity release advisor.
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I understand the principles of a Lifetime Mortgage, the only query that I have is in your “Calculator” when I am asked to enter the length of term of the mortgage. If I borrow say £75000 and enter 5 years for the period of the loan, what happens after 5 years? I assume that I will then have to pay back the £75000 plus interest inccured? So depending on the term period, I am more or less in a situation then that I have to sell up and manage on the equity remining to me, is this correct?
[Reply]
admin Reply:
March 30th, 2010 at 4:05 pm
Dear John.
These plans are lifetime agreements with no end dates and as such they only terminate when the surviving borrower passes away or moves into long term care. The reason why you can select the term on our calculator is to give you some predictions of how much equity will be left in the estate after a certain number of years i.e. 5,10,15 etc’.
If you would like to discuss this calculation in more detail please contact one of our advisors on freephone 08080 10 10 10, or via our website http://www.agepartnership.co.uk by requesting a callback.
Kind regards
The Age Partnership Team
blog@agepartnership.com
admin
[Reply]
John Heslington
26 Mar 10 at 5:40 pm
Interesting read, thanks! I finally see the larger picture
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Pierre Meikle
13 Jun 10 at 6:15 pm
this article give many tips. it is useful.
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