First, let’s talk about Equity. Equity is the difference between home value, mortgage total, and loans that are secured against it. So, the Equity release is termed as an agreement that gives you access for the sake of cashing out money from the same equity value left in your property.
In easy terms, equity is the market value of your home taken from any debts you have secured against it, and Equity Release is the process that turns that same equity into spendable cash or equity amount, without you having to sell your home.
So, what are the criteria of Equity Release?
The only criteria which are important to note are that you need to be at least 55 years of age, only then you will be able to cash out the amount as a small regular monthly or annual payment or the lump sum of it.
On the other hand, when you are thinking about this process, you need to be fully aware of all the advantages and disadvantages or rules and regulations. In this case, you will have to get some professional advice that teaches you all about the rules and regulations.
There is no income requirements or there is no credit rating scoring that stops you.
Types of Equity Release:
There are not many types of Equity Release but depending on your home or your home plan or the amount of payment you want, you can get two choices. These two choices are;
Lifetime Mortgages:
In Lifetimes Mortgages, you get funds in small overtime amounts or in a lump sum single time. Here, you will have to make up your mind about the minimum amount of money you can borrow.
You will be able to choose whether you want to make a payment or not. This is important to consider when you are legacy planning for your children and normally it’s important to get your children involved in this decision:
Facts:
- It is important to be the Homeowner when talking about Lifetime Mortgages.
- There is interest in the Lifetime Mortgage. Which can be paid or “rolled -up”
- In this scheme, there are dual choices, either let the interest stack over time or make the repayments.
- Interest and the loan will be paid back in two cases, either you are into long-term care or you simply died.
Home Revision Scheme:
Just as the name suggests, the Home Revision Scheme is mainly the home plan, in which you can sell the part of your home in return for a lump sum amount or monthly payment.
Facts:
- Parts of the home are sold to the Home plan revision company
- You can continue to live in the sold property till you are no more.
- There is no rent payment in the sold property.
Whether it is the Home Revision Scheme or the Lifetime Mortgages scheme, you can live in your own home comfortably till the borrower who is last surviving is dead or has traveled from his home into extended-term care.
Equity Release Advantages:
- In this Release or the home plan, you can stay safely inside your home for as long as you desire.
- You get a regular monthly amount or a total in one, which can help you out in your needs like bill payment, care costs, or even a home plan improvement at least.
- As long as your other property is accepted, you can move to another one.
- A part of the same property value can be set as an inheritance to your family.
- Paying rent to the providers is not essential.
- In the Lifetime mortgage scheme, you have the choice of either letting the interest build up or pay back some of it.
- In the same scheme, interests can’t rise above a level.
- The loan is paid in two conditions, either your property is sold or you are no more.
- The total amount you have can’t in any condition be greater than the property amount. But that is on some of the schemes of equity release, not all.
- From the main home in the home plan, you don’t essentially have to pay tax on the release of equity.
Equity Release Disadvantages:
- As the time proceeds, the equity you own becomes decreases.
- A small inheritance is only available for you to give back after your death.
- Lifetime Mortgage further elaborates to a sense that you are securing more borrowed amount for your house.
- Home revision companies will ultimately give quite a little amount for the property you own and you won’t be the independent owner of that property.
- You can lose money if you die or sell the property you live in after taking the release of equity.
- In case the price of that property is decreasing, you owe a larger part of that home plan value.
- If you live longer than in the lifetime mortgage, you ultimately owe the property fully.
- The amount of benefits of an entity is decreased by releasing equity.
- If a relative is moving in or someone else, you will have to take permission from the provider.
- Same as that, when you are moving out to another place, you will also have to take permission from the provider.
- It is essential to pay the amount for transaction arrangements, legal fees, or even the property value.
- Responsibility is on you to pay the bills like electricity, gas, and even the council tax or the insurance for the building.
- Last but not least, you will have to pay for the maintenance or repairs, and you are also responsible for them. In this case, you have to regularly look after the stuff at home and spend a bit taking care of it.
When should you consider going for an Equity Amount?
Equity Release is specifically helpful for you when you want to repay existing mortgages OR increase your retirement income OR looking to reduce your inheritance tax liability.
Choosing the Best plan as a perfect Customer:
First of all, you need to make sure that the lender you are dealing with is a part of the Equity Release Council
There should be no negative equity guarantee, meaning the owed amount is never more than the property
Arrangement fees or simply called the application fees should be taken into consideration.
There is an independent product rating, which gives you the know-how on the flexible products; those not having hidden fees.
Get in touch with Simple Financial Planning
Get in touch with us today to help you with your financial needs, our aim is to make it simple for you!