Thinking of releasing equity from your home?
Sales of equity release plans have increased over the past few years. In Scotland, figures from the equity release board indicated that customers took an average lump sum of £39,834. UK average figures across the UK were around £72,000, with those in the South East releasing an average of £84,000.
What is an Equity Release?
Equity release schemes were first introduced in 1965 and have gone through a number of changes since then. It is a method of preserving your property while receiving a lump sum or a steady stream of income from the value of the property.
Who can benefit from an equity release scheme?
If you are a UK home owner aged 55 or over, you may be entitled to access money tied up in your home.
What are the different schemes?
There are two types of equity release: lifetime mortgages, where you can borrow money against your house; and home flipping, where you sell a share of your property.
Lifetime mortgages With a lifetime mortgage, you can borrow a portion of the value of your property and interest is charged on that amount. You usually don’t get anything back until you die or sell your home. Interest is charged for the entire loan period.
Home renovation With a home reversion scheme, you would normally sell a share of your property to the provider for less than market value. You have the right to live in the property for the rest of your life. When you move into care or die, the property is sold and the provider receives the same share of the property as they paid for (eg if you sold 40% to the provider, they will receive 40% of the sale price).
Why has it become so popular?
Equity release has become popular in recent years for a combination of reasons. One of the main reasons people release income from their property is to supplement their lifestyle after retirement. Rising house prices have meant that property has become a key part of many people’s retirement plans. For some, downsizing is the optimal thing to do, but for those who wish to stay in their home, equity release offers an alternative way to access your home’s value while still being able to live in it.
Another reason equity release has become popular is due to changing attitudes. While it was once expected that wealth would cascade down to the family, nowadays many younger generations do not have the same expectations, or rather their parents would use the capital to enjoy their retirement – which is now likely to last two or three decades.
Why release equity from your property?
There are many reasons why you can release equity from your home. Some of the most popular reasons include funding home or garden improvements, funding a holiday, paying off credit card or loan debt.
What should you keep in mind?
Releasing equity from your home is not an easy decision. This is a lifetime commitment and it is important that you fully understand the obligations and consequences before committing to a plan.
Search stock release board from a trusted financial advisor is an important step in making sure you make the right decisions. A financial adviser will be able to assess your needs and circumstances and let you know if you qualify for equity release and whether or not it would be a wise financial move.
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