Equity release is a process in which a retiree increases money against the property value of their house and the lender is paid back once the property gets sold. Mainly there are three equity release mortgage plans on the UK market. They are lifetime mortgage, withdrawing lifetime mortgage and home reversion plans.
The money released from equity is used for many purposes. You need not worry for the rest of your life and can enjoy peacefully. Thus you can improve your lifestyle after retirement, help your children or grand children by mortgage deposit or contribute a larger share to the family expenses to avoid being a burden.
Previously equity release schemes possessed a very bad name due to increased rates of interest and low value of assets. However, today's schemes are very advanced and popular. You can benefit a lot from these equity release plans.
Types of release equity plans
Lifetime mortgages - This type of mortgage gives you a lump sum amount of cash, which does not levy any tax on your residential assets. Moreover you need not repay it as these are deferred till your property gets sold or when you expire. Generally the interest that is outstanding is repaid. A famous version of this lifetime mortgage is withdrawing lifetime mortgage, where the retiree can take money in small amount when he needs. Using this type of plan, you can avoid accrued interest on loan that is accumulating for a long time. People, who make use of this type of loan, select an interest rate that is fixed throughout his life so as to know the outstanding amount at every point of time in the near future.
Home reversion plans - With the help of this plan you can sell off your house in substitute for a lump sum amount of cash that you can spend whenever you want. In this case, there is no need for you to make any monthly repayments with the loan and the outstanding interest is paid fully when you die. They can release more money with no involvement of any loan. Old people find home reversions plans to be attractive since they are not concerned with leaving behind any inheritance. Some people also use this plan since they believe that their property value won't increase much in near future or neither will it fall down.
These equity release schemes are very helpful especially for a retired person, who wants to lead a good lifestyle for the rest of his life without any tension.
Equity release to pay off your debts
After your retirement, you can easily clear your debts with the help of equity release mortgage. Since release on equity pays you a lump sum amount and sometimes on monthly basis, you can pay off your past debts by making monthly instalment. You just need to consult with your money lender who would defer your payment date and gradually you can return the money to the debt collectors. Thus, you can prevent yourself from the harassment of debt collectors.
Jonathan James here focuses on the ways about how you can reduce your liability. After your retirement you can opt for an investment scheme and equity release mortgage helps you to pay off your past debts as well.