| Equity Release Schemes Get You Cash When You Need It |
| Articles - Mortgage |
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The equity you have in your home is determined by the market value it has minus any secured debts you have on it such as an outstanding mortgage. An equity release scheme lets you get some of this equity in cash without the need to meet an ongoing monthly payment, and allows you to +still reside there. They come in two basic types.
The equity you have in your home is determined by the market value it has minus any secured debts you have on it such as an outstanding mortgage. An equity release scheme lets you get some of this equity in cash without the need to meet an ongoing monthly payment, and allows you to +still reside there. They come in two basic types. The basic types of equity release plans are called home reversions and lifetime mortgages. You have to be a certain number of years old for these plans. The exact age is dependent upon the company you work with but it is usually at least over 50, sometimes much older. In a home reversion plan, all or part of your home is sold to an individual or company. The cash is usually paid out in one lump sum. You are then able to continue living in the home as a tenant for free or, sometimes, for a very nominal fee. Your residence can continue until your death or until you move. The amount you will receive depends on your age as well as other factors such as the value of your property. There are a few different types of lifetime mortgage plans. In each case, however, you still own your home. You borrow money against the value of your home and continue to make your mortgage payments. One type of lifetime mortgage plan is the Roll-up Plan. The money can be paid out in either a regular monthly payment or as a lump sum, and sometimes as a mixture of the two. Interest will accrue on the loan but is not paid until such time as the home is sold, either upon your death or your moving out. Interest will be accrued not only on the loan but also on previously accrued interest. Therefore, if you choose a lump sum payment, the amount you owe can really add up fast. In the case of a drawdown version of this mortgage, the cash is paid out in either smaller regular payments or as you need it. Because of this, the debt increases at a slower rate. Drawdown equity release mortgages account for the greater proportion of plans written each year, as they reduce the amount of accrued interest that would otherwise be added to the loan. Minimum initial lump sums are usually set by the equity release providers at between 10,000 and 25,000. Another lifetime mortgage is referred to as interest-only. With this one, the payment is taken in a lump sum with the interest paid on a monthly basis. The original loan amount is paid upon selling of the home. The risk is, in the case of a variable interest rate, you encounter difficulties making the interest payment on a fixed income. Home income plans pay off a lump sum which is then used for purchasing an annuity. This gives you a regular income, part of which is used to pay the interest rate each month. The rest can be used at your discretion. When your home is sold, the original loan is paid off. It is best to use this plan when you are older than just following retirement. There are a lot of factors to think about when engaging in an equity release. Be sure that you understand all the terms involved. It is a good idea to get some expert advice before you commit to one of them. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. An equity release allows home owners access to equity in cash without having to sell or move out of their homes. We have got the best inside information on lifetime mortgage |