Equity Release Mortgages
Also known as Capital Release Mortgages or Home Reversion Schemes, Equity Release Mortgages allow borrowers to convert some of the equity within their homes into cash.
The equity in someone's home is the amount of the properties value that exceeds any mortgages or loans secured against it, equity can also be classed as the amount you have paid off of your mortgage depending on what type of mortgage you have. If you own you house out right and you do not have a mortgage then the equity in your home is equal to the total value of the property.
People choose to release equity in their homes for a number of different reasons; sometimes to make some home improvements such as adding an extension or conservatory, converting their loft to create extra space or perhaps a total internal renovation. Some people release equity to buy a new car or put their children through university, whatever the reasons the underlying concept remains the same.
Instead of using an equity release scheme to procure extra cash you could simply choose to remortgage your home however this practice is likely to increase your monthly payments and possibly extend the length of your mortgage. Equity release is an easy way to raise extra cash by using some of the capital held in your home with out having to make any additional payments.
If you choose to release equity in your home for whatever reason this does not mean you have to leave your home, you continue to live in your property for as long as you and your partner are alive. You don't have to pay anything back during your life time and you can choose to move house at any time. The lender gets their cash back after you have passed away through the sale of your property.
Equity Release Mortgage schemes can vary in the way that they pay out the monies to you. The way you receive the money can be optional, for instance you choose to receive a lump sum, two lump sums or smaller regular amounts.
If you have not invested in a work or private pension scheme in the past and you are coming up to retirement you may be worried about how you will survive without substantial income. The rising population and the fact that people are living longer means that state pension funds are spreading even thinner, the current state pension is far less than adequate and barley enough to survive on.
Equity release can provide an income and a better standard of living through retirement if you have no savings or other pension scheme. Some retired citizens who had paid into their mortgage for long periods of time before retiring but had no savings or pension scheme have had to rely on a state pension as an income because they didn't have the knowledge that they could unlock the equity in their homes.
Some people simply choose not to unlock their equity because they would like to pass on their property to their offspring after they die. The choice really is yours so make it wisely, it is always advisable to seek professional advice from a certified professional and ensure that any mortgage or scheme you decide to take is regulated by the FSA or adheres to the safe home income plans (SHIP) code of practice.©MoneyHighStreet.com