Equity Release Explained
If you are looking for a way to improve your finances in retirement, equity release is the perfect solution. Equity release plans provide you with a variety of opportunities to unlock money that is tied up in property that you own such as your home. The main aim of these plans is to provide you either with a regular monthly income throughout your retirement or with a lump sum cash amount that you could use for any purpose. These plans allow you to release all or a part of the total value of your home. Wait! Does this mean that you will not have a home to live in in your golden years? Absolutely not! The great thing about equity release is that even though you release money tied up in your home, you are still allowed to live in your home. In fact, you get to remain in your home until the day you die or move into long-term care.
So what about repayments? If you are to get money against your property, you must have to make repayments? Well, not really. There are some plans that ask for a minimum repayment; however, most plans do not require any repayments. How do the equity release providers get back their money? Well, when you die or move into long term care, your house is sold and the sales proceeds is used to repay the equity release provider. This is why you will never be able to release more than the value of your house.
Common Equity Release Plans
The two most common equity release plans are: lifetime mortgage and home reversion.
Lifetime mortgage: This equity release plan allows you to obtain a loan against your home. The provider charges interest. The amount you initially borrowed and the interest never exceeds the value of your home. For the rest of your life, you get to enjoy the money obtained from the loan without having to make any repayments. When you die or move into long term care, your home is sold to repay the initial loan amount and the accumulated interest.
Home Reversion: With this plan, you sell all or a part of your home to the home reversion company; however, you are still allowed to remain in the home until you die or move into long term care. When you die, your home is then taken over by the home reversion company who can then choose to sell it or even rent it. No! The home reversion company does not charge interest. How do they make money? Well, when you choose to sell all or a part of your home to them, you will be selling it at a value below the market price so that if they eventually chose to resell it, they can make a profit.
Benefit of Equity Release Calculator
Opting for an equity release plan is a decision that should not be taken lightly. The impacts of such a scheme are significant. For example, it influences the inheritance that you will be leaving behind for your loved ones. In some cases, some of the sales proceeds from your home will go to your loved ones but in other cases, the sales proceeds will be completely used to repay the equity provider leaving nothing for your children or grandchildren. Is there a way to prevent this from happening? Yes, there is!
Through the use of an equity release calculator you can calculate the calculate the equity that can be released. By calculating this, you will know exactly how much you can release and how much you will eventually have to repay. If you want to leave behind an inheritance for your loved ones, the equity release calculator will help you determine the amount that you should release from your property to ensure that the amount that you want to leave as an inheritance remains untouched.
Equity release calculators can be found on almost any website offer equity release plans. When using an equity release calculator, it is important to understand that the figures are just assumptions or projections. They are meant to give you an indication of what you can expect so that you can make a more informed decision. However, if you want exact calculations, you should get into contact with a representative from an equity release provider who will not only make exact calculations for you but will also explain all of the ins and the outs of equity release as well as the advantages and the disadvantages. Once you fully understand the impacts of equity release only then should you make the final decision.