What is Equity Release?
Equity Release is a term given to schemes that enable homeowners to free up a chunk of the capital tied up in their home without having to make regular monthly repayments. In light of the recent economic downturn a growing number of elderly homeowners are turning to equity release to make their retirement more comfortable, and to open up exciting new possibilities in later life.
An equity release plan allows you to raise money from your home as either a lump sum or regular income, or both – and at the same time you and your partner can continue living there until you both die or move out.
The amount of equity you can release depends on a number of things but most importantly depends on the value of your home and your age. There is no maximum age limit for equity release. In a lot of cases, the older you are, the more cash you are eligible to release from your property. Most plans are available to homeowners from the age of 55+.
Tax Free Equity Release
Because the equity in your home belongs to you in the first place the cash you decide to release is tax-free and unlike traditional mortgages you don’t have the burden of saving to make regular repayments. The money is yours to spend on luxuries or whatever you wish enabling you to live a secure and comfortable retirement. Equity release plans can be tailored to fit individual needs and there are many plans available on the market.
Types of Equity Release
There are three sorts of equity release plans available on the market, with several variations on each plan. They are Lifetime Mortgages, Drawdown Lifetime Mortgages and Home Reversion Plans.
The lifetime mortgage and drawdown mortgage involves taking out a new loan secured on your home, whereas the home reversion involves selling all, or part, of the ownership of your home. In return, your chosen equity release plans will pay you a lump sum or a regular income.
If you’re thinking about releasing equity from you home then it’s important you choose the right plan. The first step is to seek advice from independent equity release specialists who will research the market and guide through your decision-making.
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