Before we look at this subject let us be clear this article is not offering financial advice it is just some points to consider, we strongly advise you do your own research. The information below are just considerations to hopefully help you in the future.
Equity release is a relatively simple idea. In a nutshell you are taking money out from the value of your property as it has either increased in value, your mortgage has gone or reduced or both.
You will no doubt have seen adverts telling you to “unlock the value in your home” and this is true to some degree as if you have been in the property for several decades, it is very likely that your home will have increased in value. It is this value rise that will be unlocked.
What we are essentially looking at here is a mortgage or loan being taken out on the property to put money in your pocket.
There are 3 main types of equity release including:
- Lifetime Mortgage. At present this is the most frequently used type of equity release plan. Whilst it is a mortgage you do not make payments against it. Interest is added yearly to the loan. Bluntly put, when you die or sell it the amount is reduced from the profit that’s made. This will reduce any inheritance that your next of kin and beneficiaries form your last will and testament will receive.
- A Drawdown. In this scenario you take a loan for example £40,000 but it is released in stages or tranches say £10,000 over 4 years. The amount that comes to you accrues the interest not the full amount from the start so you can stop it if you feel you have enough.
- Reversion plan. This is proving to be a popular way to fund retirement. In this type you sell a percentage of your home. The lender will legally own that part of the property and exert some control in what you do with it. Again, like other options you pay no interest. When the property is sold or you pass away the lender gets a percentage from the sale.
There are a lot of factors that come into play with any financial solution, one of which is ensuring legality. Finance providers will typically use the services of businesses such as www.w2globaldata.com/an-idiots-guide-to-aml-kyc-id-verification/ to perform AML ID Verification services, so ensure you have all your data up to date for a smooth process.