This Business News Story Was Uncovered By Us From: https://nopassiveincome.com/equity-release-explained/
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If you’ve had a mortgage for decades, you’ve accumulated a significant amount of equity, sometimes several hundreds of thousands of pounds, in the home. If you need the cash, perhaps to cushion your retirement, to fund your in-home care, to help out family members, or to make improvements to the house, you can use a product called equity release to access the value tied up in your home, either as a tax-free lump sum or as a monthly income.
Equity release is available to people over the age of 55 who own their property outright. There are two options for equity release: lifetime mortgages and home reversion. Below, we’ll take a closer look at each and why you might want—or not want—to release equity from your home.
Lifetime Mortgages
A lifetime mortgage is a loan you take out against the value of your property, while retaining ownership of it. Typically, the maximum amount you can withdraw is 60% of your property’s value, either as a lump sum or in smaller increments. However, the younger you are, the less equity will be available to you. For example, 65-year-olds can generally borrow 25% or 30% of their home’s value.
Additionally, the younger you are, and the longer you live, the more expensive the loan will be. This is because, with traditionally lifetime mortgages, you won’t make any repayments on the loan while you’re alive, so the amount owed will grow as the unpaid interest ‘rolls up’ (is added to your loan). This means the loan amount can escalate quickly. There are now some lifetime mortgage products on the market that allow you to pay off the interest over the term of the loan, however.
Interest rates on lifetime mortgages are either fixed for the lifetime of the loan or variable. If they’re variable, there will be a cap,… Read More
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