Find The Best Equity Release Mortgages in the UK
There may be instances when a homeowner or pensioner needs to access the value of his or her home as a source of extra liquidity. Although this is sometimes accomplished through the direct sale of the property, equity release schemes are another popular avenue in such a case. As the owner can access this liquidity without the need for an outright sale, this vehicle proves quite advantageous for those who may otherwise be on a limited budget. So, let us take a brief look at the types of UK equity release mortgages and unique aspects of each one.
The Types of Equity Release Schemes
It is first important to appreciate that there are two different types of UK equity release mortgages: lifetime mortgages and home reversion schemes. As each is markedly different, it is essential to understand the basics of how these two plans work.
Lifetime mortgages allow the homeowner to take out a loan against the value of the property. This can either be in the form of a lump sum, incremental income or a combination. The two biggest advantages with this type of scheme is that one will not be required to sell the home and that the money owed will not be repaid until the borrower passes away or is admitted into an elderly care facility. However, this type of scheme should be considered only after using what is known as an equity release calculator. An equity release calculator will take into account several variables including age, the value of the home and any percentage of the value that is allocated towards an inheritance. This calculator will help to determine if one is eligible for this release scheme. Finally, it should be recognised that some stipulations will preclude one’s ability to qualify for this type of aid. The type of property, the age of the homeowner(s) and the worth of the home will all be taken into account. UK Mortgage experts are happy to address any of these concerns with our applicants.
Home Reversion Plans
This option is less common and involves the homeowner essentially “selling” a portion of the property to a third-party company in exchange for a lump sum(or incremental payments) and the ability to continue to live in the home. It should be known that if and when the home is eventually sold, the owner will only receive the amount that he or she has not sold to the third party.
Although not applicable to home reversion schemes, it is important to take into account for the amount of interest that will be owed in reference to a lifetime mortgage. This is due to the fact that in reference to this type of mortgage, no money is paid back until years later. Thus, the interest will accumulate over time; leading to a potentially massive sum that must be paid back. Thankfully, an option known as a “draw down” is offered. The borrower will only be required to pay the interest on the amount of money that he or she withdraws (hence the name “draw down”). Should a moderate amount be needed, a great deal of money can be saved on interest payments. Once again, an equity release calculator can help to decide as to whether a draw down scheme is appropriate.
Both a lifetime mortgage and a home reversion plan (to a lesser extent) are quite advantageous equity release schemes. Still, it is important to take into account such factors as the age of the borrower (or borrowers), the value and type of the property and the intended use for the extra liquidity. Some of these terms and mechanisms of these UK equity release mortgages may be unfamiliar to you, which is why it is important that you seek the help of FCA authorised mortgage experts who will provide free independent advice to assist you in making your decisions and there equity release experts are happy to provide both clarity and the insight necessary to allow borrowers to make the most informed decisions that are possible.