What is Equity Release and Why May it Benefit You

Many people who are middle aged or younger will look forward to retirement in their minds and think of it as a time where they can relax and have a comfortable time. Most people, at any age will dream of a security to their finance where they want for nothing with a nice home with plenty of space and be given the time to contemplate the wonderful memories with family and friends. With today’s climate a lot of these dreams remain just that and are tough to bring to fruition. Factor the high cost of living has largely increased from utility bills to food and petrol costs without matching salary increases and couple this with unemployment. The prices of houses have gone up from what they were 10 or even 15 years ago when you may have purchased your home. As these prices have been steadily rising over the past years, it means that home owners can capitalise on the equity built up on their home prices and help them to release a higher quality of life in their elder years.

The beauty of equity release is that it helps the house owner to keep their home and use it as they have been doing but at the same time they get continual income brought about from the higher value of their house. Why this is becoming popular is that the money can be paid back to these financial institutions later on or upon the death of the home owner. The scheme is particularly good for home owners who have no family or friends or where they wouldn’t like to pass something on after they have died.

More benefits include, the cash that you get is tax exempt and this money can also be used in an annuity for the remainder of your life, giving you regularly monthly income into your retirement years. You are risk free in that if the value of the property you are protected with NNEG.

The disadvantages of equity release include your family and friends will inherit less money when you die. This may not be a disadvantage if you don’t have family! You may also not be able to receive all government aid and help if you choose this route.

A lifetime mortgage is a equity release plan of sorts which is becoming increasingly trendy with homeowner. With this the homeowner uses the money from the equity release to pay the mortgage off in full. The interest stacks up each month and gets more then the balance that is payable on the lifetime mortgage. The spouse, if the homeowner dies, is not obliged to payback the interest and proceeds.

Equity release schemes are usually only applicable to homeowners over 55 years old. A reversion plan is also a equity release scheme whereby part of the entire home is sold to the financial provider. They then give the homeowner the right to stay in the home for the rest of their life and get a monthly income.

By Suzana