Should you Think about Releasing Equity from your Home? Find Out Here
If you were to release equity from your home, then you would do so while you are still living there. You can only release equity from your property if you are over the age of 55 and own your own home but are struggling to find the money you need to have a comfortable retirement. Releasing equity from your home is certainly not something that you should be doing lightly.
What is Equity Release?
In simple terms, equity release is a way for you to unlock the current value of your property so you can then turn it into cash. You can do this in several ways, and you do not need to have paid off your mortgage in full, to access this. You can take your money in a lump sum, or you can do it in very small amounts over time. The most common form of equity release would be to have a mortgage that is not paid until you die. If you do not have anyone who you would like to leave your assets to then this would be a decent way for you to get the cash. If you do have people who you would like to leave your assets to then you should know that equity release will mean that there is less money for them to inherit.
Lifetime Mortgages
This is one of the most popular options if you want to release equity. You will borrow some money against the value of your home at a capped interest rate. If you choose to receive money over time then your interest will be charged at the amount of cash you have taken out over time, and not the amount you intend to draw out. With both forms of this mortgage, if you do not make any repayments, you will see that the mortgage interest compounds as the amount that you owe will rocket over time. Normally you can just choose to repay the interest, but this can vary.
Home Reversion
With this, you will receive a tax-free lump sum. This will be set at your home’s below market value. If you do this then you can live in the property without any rent, until you die. When you do die, the property will be sold, and the proceeds will be split between the amount that you own and the amount that the lender owns. If the property value goes up, this will work in your favour.
What if you’re Under the Age of 55?
So, what happens if you are under the age of 55? If you are approaching 55 then you may feel as though you can wait. If you’re not in a position where you can wait and you have a pressing need then you may want to remortgage your property. This is a good way of you being able to lower how much you pay towards your property every month, but not everyone is eligible for this.
Source –
Moneysavingexpert
