Keen on Taking Equity Release Scheme: Know All About It before Grabbing the Deal

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Before you push into equity release deal, it’s wise to know everything about various types of schemes being provided in the equity release market. You should know, based on your circumstances, that which one will offer you more benefits. Each equity release scheme is attached with certain kinds of benefits for respective age group and committed to offer benefits based on your needs and wants. 

Usually, equity release facilitates ownership retaining rights on all the schemes. It means that in spite of mortgaging your property, you can live rent-free in the house for entire lifetime. Equity is withdrawn on the current value of your property and no negative equity is guaranteed under all the circumstances. 

Money can be withdrawn in large cash lump sum or as monthly income. Typically, equity release money is tax free but when you use the money to generate income, it can be taxed. You have freedom to use the money as per your wants; equity release does not put a bar on it. 

So, now that you have known entire virtues of equity release, take a look at different schemes and what they have to offer you. Typically, equity release comprises of two basic schemes.

Lifetime Mortgage: Holding similarity with standard mortgages, lifetime mortgage is secured against the value of your property. But, it functions quite dissimilar to standard mortgage plans. You do not require making monthly repayments, as interest built-on and added into principal amount later. Usually, loan amount, in addition to interest rates, is paid by selling off your property, which you can occupy until death. 

This plan is beneficial for them, who are unable to carry out monthly interest rate payments. Although, a typical lifetime mortgage allows you to withdraw equity in large cash lump sum but, these days, this plan has been made more flexible. Drawdown lifetime mortgage facilitates to withdraw money as monthly income as well. On the other hand, if you are keen on paying monthly interest rates, interest only lifetime mortgage can be a solution. 

Home Reversion Plan: If you are keen on leaving inheritance and at the same time want to withdraw more money from your property, home reversion can be a better idea. Under this scheme, if you are over 65 years of age, you can sell entire or part of your property to the money lender. 

This plan has some unconventional offers as well. If your property gains in its value, in the future, you will be provided additional amount at the end of plan. 

However, choosing best equity release schemes can be complex and you also required to know all the risk factors involved into releasing equity from your house. It is always recommended to seek advices and opinions from financial experts.