Some individuals understand a few of the important details about equity release, while other homeowners know just one or two factors about this important subject. Unfortunately, many of these individuals start the process without learning more, and without seeking professional assistance. Before you sign on to any program that uses the equity in your home, you should do all you can to understand your obligations, as well as the benefits you will receive.
Equity release, in the most basic terms, means you continue to live in your home while receiving income based on the value of the house. If there is a “catch” in the process, it comes later, generally when the property owner dies. At that point the lender providing the income must be repaid. It’s that simple. The concept can be quite useful for older persons who don’t plan to leave an estate to heirs (In some locations around the world, the process is called a reverse mortgage).
In the UK, this process is available to people over the age of 55. Homeowners, with enough equity in their home, can release some of this money through an arrangement with lenders who specialise in such contracts. The amount available is determined by the market value of the property, minus the amount still owed on mortgages, liens, etc. When you work with a company specialising in options for equity release, you can get the money in the form of a steady income, or as a lump sum.
The money is yours to spend as you wish, you still live in your home, and the funds are repaid when you no longer live in the house. Gaining access to this money can help you keep up with bills, clear up outstanding debts, or give an early inheritance to family members. If you decide it’s time to enjoy travelling, you can use the money for that as well. If you’re wondering if there are any disadvantages to this type of program, the answer is yes.
However, the disadvantages can be less significant than the benefits you receive, if you work with a company you can trust, and you fully understand the agreement you’re entering into. Equity release can reduce the amount of money family members will inherit. This process can also be more expensive than selling the property to get access to the equity. The key factor to remember: you can continue to live in the home. You don’t have to sell the home or give up ownership.
Any time you make a major financial decision, including this one, you should do all you can to be an educated consumer. If you don’t want to move from your home, and you have sufficient value in the property, this could be an ideal option. Start the learning process by visiting the website of a leading provider for equity-release programs. Gather all the information you can, then call to talk to a knowledgeable representative. You may also be able to transfer the plan to another qualifying property in the future, should you decide to move.