Equity release – why so many opt for equity release
Equity release is a way of raising capital through the value of your new house without having to move elsewhere or sell the property.
Once most of your mortgage is paid off and you have a significant amount of equity tied up in your home, you may want to release some of that property value. Equity release allows you to do that. If you’re over 55, this is a way to secure a one-off payment or regular payments, either as a loan against the property’s value or by selling off a percentage share of your property. It’s similar to a mortgage but you don’t have to make any monthly repayments. Instead, you agree that the money will be paid back, plus interest, once the property is sold in the future.
Many companies offer equity release. However, before considering it as an option it’s highly advised that you go to an independent financial advisor. With their professional expertise they’ll be able to show if this product is suitable or if there is a better alternative for you. One of the options with equity release is a drawdown lifetime mortgage. After agreeing with the lender how much you can borrow, a drawdown lifetime mortgage allows you to receive smaller regular payments and interest is only charged on what you withdraw rather than the full loan amount.
Equity release can seem the perfect answer to accessing cash through the value of your property. However, it’s important to remember that the overall value of an estate will decrease as money is taken out of it. You also have to check whether any payment you receive could affect any state benefits you get. In addition, always make sure any provider you deal with is a member of the Equity Release Council (ERC). This body helps safeguard customer’s financial interests in regards to equity release providers.
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