Equity release is a process of unlocking the value of your home and turning it into cash. This can be done in many different ways, and it depends on the total amount of money you have already paid on your mortgage.
You can either take the money in the form of a lump sum, or you can keep taking out small amounts at a time. Please keep in mind that you will be required to pay interest on the money that you take out. Ensure that you ask for advice in order to do it the right way. Otherwise, you may end up having an extremely expensive loan on your hands.
Equity release is regulated by the Financial Conduct Authority (FCA). For additional protection, it is also covered by a body known as the Equity Release Council (ERC) which represents the qualified advisers, the equity providers, and all the surveyors who work within the equity industry. All of these people must adhere to a strict code of conduct which is all geared towards safeguarding you as the customer. Below, we will talk about all the ways an equity release could help you.
Ensures That You Don’t Leave Your Family In Debt
As part of the regulations governing equity release products, there is a ‘no negative equity’ guarantee which covers all products. This means that should the value of your home not rise in line with expectations, or it should fall, then you (or your family, if the house is a part of your estate upon death), will never be left with a debt amount to repay that is greater than the value left in your home at the time of the sale.
Ensures That You Retain Your Home
With an equity release, you get to stay in your home whilst also freeing up cash to do those things in life you want, or need, to do.
With a traditional mortgage, the main risk for borrowers is that you may find yourself unable to make repayments. The risk is also that if you get too far into debt the lender may decide to get an order to repossess the property. The lender will then sell the property to recoup as much of the money that had been lent to the borrower as well. With most equity release schemes, however, you — the borrower —are not required to make any regular repayments to the lender. So, the question of not being able to afford to repay the loan simply does not apply.
It is rare for a lender to take possession under an equity release plan. But, as with every contract, failing to comply with the terms and conditions of an equity release plan, could mean that your house might be repossessed.
You Can Use The Money As You’d Like
You can choose to spend your money however you would like. It could be for essential home improvements or expansions or to help family members out financially. Further yet, it could simply be to live out your years in comfort while doing the things you’ve always dreamed of. In any case, you can choose what to do with the money.
You Are Free To Move Into Another House
Most equity release providers will allow you to move to another home subject to them approving the transfer of the loan to the new property. So, just because you take equity out of your home, doesn’t mean you will have to live there forever.
You Can Take The Money When You Need It
Unlike other types of loans, you don’t need to take all your money at one time. It is possible to take it in smaller sums and only when you need it. There are advantages to this, as it means you are not paying interest on any equity you’ve not yet released, but you still retain the right to use it should the need arise.
In summary, an equity release has a great many advantages to those who wish to stay in their own home and release some of the wealth they have tied up in it. There are no monthly repayments to worry about and you, therefore, cannot be thrown out of your home for failing to keep up with payments.
However, it comes at a price as the amount the lender can end up taking, when your house is eventually sold, can be very high. If this is something you are not concerned about, then equity release is a good choice. However, if you worry about the potential future implications of this, then it is best to look into alternatives to equity release.
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