A lot of people have heard about equity release. They may know it as a reverse mortgage or an equity drawdown scheme, but they are not sure what it is and whether or not it's good for them.
Equity release can be life-changing for those who need to find a way to maintain their lifestyles while also meeting the needs of their children, grandchildren, or other dependents. This article will help you understand what equity release is, how much it costs as well as how it could benefit you in your retirement years.
A Quick Introduction to Equity Release
Equity release is a form of mortgage where the owner uses their home's equity to help pay for living expenses in retirement. It can provide financial stability and peace of mind without moving or worrying about losing one's independence. Equity release is also called reverse mortgages, equity draws, and lifetime mortgages.
Are You Eligible For Equity Release?
To be eligible for equity release, a person must own their home outright or have sufficient savings to pay off the mortgage. They also need to either live in the property or intend to return within 12 months of leaving it. The borrower needs an income that is able-bodied enough and has been stable over six months before applying for the loan and having at least one dependant living with them.
Is Equity Release Right for You?
Equity release is a great way to increase the financial stability of homeowners who are in retirement. It can provide them with peace of mind and security without worrying about moving or losing their independence.
However, it may not be suitable for everyone depending on certain factors such as age, income level, or health status. To find out whether equity release is appropriate for you, speak to an advisor that works specifically in this field.
Should You Take Out Equity Release?
If you're considering equity release, it is important, to be honest with yourself about your position and what you want from the next phase of life.
Whatever your reasons are for taking out an equity release loan, make sure they're backed by a realistic discussion on whether or not this debt will help achieve these goals.
Suppose you are in good health and don't foresee any changes to your economic situation. In that case, equity release might be a viable option for increasing the living standards of an older person. But if this isn't true for you, it may not make much sense to take out equity release loans.
What Type of Equity Release Is for You?
Equity release comes with several different types:
Interest-only mortgages; Lifetime mortgages, where repayments are made through a single block monthly payment at the end of the mortgage term; or Lump sum loans
The most common type of equity release loan for homeowners over 55 years old is an Interest-Only Mortgage - this will allow them to pay off their capital by releasing some or all of their property's value while still living there and paying only interest.
If you're considering taking out an equity release loan, make sure you understand these options fully before making any decisions. You should also consider whether they constitute sound financial planning for your future well-being.
Equity release is a viable option if you want to maintain your independence and avoid debt burden. With equity release, you can live in your own home or purchase another property without selling it first.
There are many other benefits with this type of financing that make it worth considering for someone looking into their options on paying off their mortgage when they retire.