Equity release helps homeowners to get extra cash during their retirement. Eligibility consists of being over 55 and owning their home outright. Lump sums are available or you can receive it like an occasional income and stay in the home until you pass away. Because of debts, and the increasing cost of living, many are starting to release equity to help get much needed ready cash.
Just remember when you do this that your children and other beneficiaries will get less when you die. This sometimes is quite popular with the wealthy but not as much with their offspring. The overall average of equity that has been released is £47,000 says the Safe Home Income Plans (SHIP) which is an organisation for firms that ensures they meet standards that make sure the treatment of customers is fair and just.
The cash for the most part is used to make improvements to the home, going on a holiday or pay debts. There are two equity release plans – a home reversion and a lifetime mortgage. The more common is the lifetime mortgage.
There are usually three factors that make people wary about getting equity release; they are reluctant to reduce the amount of inheritance they leave for children and loved ones, they have an anxiety about it being too risky, or it is complicated and a poor value for the money and that is may reduce ones entitlement to benefits.
The first on the list with regard to beneficiaries is most often the most difficult hurdle to get over. There have been some problems in the past with equity releases like in 1998 shared appreciation mortgages were sold by Bank of Scotland and Barclays which is a type of equity release.
Against the value of the home, customers borrow a percentage and when the house is sold agree to repay the same percentage. Sharp increases in home values hurt borrowers tremendously when they had to repay.