As you retire, you may find that you need other types of funding. A possible way to solve this may be to release some money from your home while continuing to live there.
According to Jason Stubbs, an equity release expert at EveryInvestor, this is where companies that offer equity release come in.
What’s Equity Release
Your property’s equity is the actual market value of your house, less any mortgage you haven’t settled yet. In summary, it’s the amount you receive if you sell your home.
However, if you want to keep your house, you may still be able to access a large portion of this money. If you have paid off an amount of or all your current mortgage, you could use companies that offer equity release.
Equity release gives you a hefty sum of money to use while enabling you to carry on living in your home. It can be valuable to cover more significant expenses, like assisted care, later in life.
However, there can be disadvantages to using the value of your house in such a manner.
What’re the Risks and Pitfalls of Equity Release?
A serious pitfall of equity release is that you won’t be able to access the entire value of your home. You might receive a lot less than you would’ve if you sold the property on the open market.
Another downfall of equity release is the reduction of the inheritance your beneficiaries might receive when you pass on. The exact risks vary depending on the scheme you choose.
Who Can Apply for Equity Release?
Equity release is only available as a solution to those who are 55 and over. If you’re nearing 55, perhaps you are in a position where you can wait until you are 55. If you are under 55 and own a home but have an urgent need, it may be an idea to speak to a broker to remortgage your house.
Are There Any Repayments on Equity Release?
You don’tt have to make any repayments on your equity release plan. You can, however, make payments should you choose to; this is voluntary.
What’re the Different Types of Equity Release?
Some of the most utilised kinds of equity release are a lifetime mortgage or home reversion:
A lifetime mortgage is a financial tool allowing you to take out a mortgage on your current home whilst retaining ownership of it. The building has to be your primary residence for this to be possible.
A home reversion plan effectively sells your home to a scheme provider which lets you live in the said property with no rent payable until your passing.
The scheme provider purchases your home at a value below market value. They will then access the total value of your home when you pass on.
How Can I Use the Money I Get From Equity Release?
You can use the money you receive in any of the following ways:
Paying for Home & Garden Improvements
One of the most common reasons homeowners release equity from their house is this.
Home upgrades may increase the value of a home while also improving the quality of life.
A New Home
People are frequently startled to find that you may use equity release to purchase a new house.
To Manage Bills
A Lifetime Mortgage differs from a traditional mortgage in that you only pay off the loan when you die or need to enter long-term care, eliminating the need to make monthly mortgage payments.
Increase Your Disposable Income.
So many of us are headed for a cash-strapped retirement. However, because many homeowners have significantly profited from increased house values, equity release might be a viable option.
To Financially Assist Family Members
You may release funds from your house to assist children or grandkids in purchasing their first property or to pay university tuition.
Equity release isn’t always the solution, but it may give you answer the memorable retirement you’ve been dreaming of. Say goodbye to financial stress and hello to living your best life.
Choosing to release equity is a significant choice, and you must locate the product that’s best for you. Therefore, it’s essential to obtain professional financial advice.