Equity Release:

1 What Is Equity Release?

Equity release is a solution for managing your finances by using any entity that has capital value. This can include your house, stocks, assets etc. The use of these objects will allow you to create a lump sum according to the value of the assets.

The equity release is most beneficial for elderly clients that intend to use their assets for generating income streams, in case they are unable to provide the prominent amount to their heirs after their death.

2 Mortgage Arrangements:

You can avail different type of mortgage arrangements based on the type of mortgage interest.

2.1 Lifetime mortgages:

The type of mortgage that is made with the effect of compound interest. The compound interest is the additional interest that is applicable to the imposed interest of the loans. The compounded interest is added on your (borrower) capital throughout the term of the loan.

Either the compounded interest is repaid by selling the property or the borrower dies or moves out. In addition, you (borrower) can retain the legal entitlement of the home as well as responsibilities regarding ownership including costs.

2.2 Interest Only Mortgages:

The type of interest, which is paid only if you, as the borrower remains in the property. The mortgage is made on the capital, which is repaid on the death of the borrower.

2.3 Home Reversion Mortgage:

This type of mortgage includes the selling of the entire or portion of your home to any third-party buyer known as reversion individuals. In case any company owns the part, it is known as Reversion Company. In return, you receive a lump sum or regular income against the part sold.

Moreover, you can continue to stay in the home if you have sold a part of the estate. In terms of selling your entire estate, you can continue to live in if the new owners agree to it.

2.4 Shared Appreciation mortgage:

A type of loan in which your lending party can agree to either lending a lump sum or by lending a sum of the capital assuring share in the future increased value for the estate. This type of loan allows you to benefit from the possible increasing value for the estate, which can result in higher returns.

However, due to market fluctuations, the value of the estate can increase at a slower pace or not increase for the life span. Unfortunately, this type of agreement is no longer available in the UK.

2.5 Home Income Plan:

In such loans, your lending party will offer you annuity options offered by any insurance companies as the form of capital return. This can be beneficial for you in terms of the annuity option you pick.

However, the annuities themselves are also vulnerable to market fluctuations, altering their interest rates that apply to the investments, which can affect your capital return.

2.6 UK Equity Release Schemes:

This scheme is available to homeowners, which are over 55 years of age. In addition, the homeowners must have enough equity in their property that can result in their equity releases with specialist lenders.