Reaching the age of 55 and having problems for cash, the best way to solve this is to equity release. However, this is only possible if you have your own home. Furthermore, doing so is not as easy as it looks. The rates maintain its cheapest value but the equity release remains being expensive.
Below are some key areas that one must have to take into account before digging in to the equity release scheme. It is also a good thing if one must understand to use the Equity Release Calculator • SovereignBoss. And, it is important to learn the essential ways to manage and improve your finances.
Scaling down your property
Primarily, considering to scale down your property is really just an option when it comes to equity release. However, thinking that scaling down would be good, then better to do it as soon as possible. Having this in mind, the decision of moving away if you opt to scale down your property would give a greater effect both on the personal and social aspect. Moreover, financing this option is necessary as the costs can be typically high.
Equity Release Definition
Basically, equity release is one mode of breaking in the worth of one’s property and convert it to lump sum in a form of cash. This can be done through various policies that allow someone to release the funds connected to your home. Moreover, paying the mortgage in full is not necessary for the release of equity.
The basic rule is it is allowed to get the money being released in a single lump sum for number of smaller amounts payable with interest.
The Process of Equity Release
Generally, equity release falls into two primary processes: the mortgage and home renovation. Explained below are the differences of each.
1. Lifetime mortgage
This process is generally common for individuals at 55+ years old. It works by borrowing some of the home’s asset at a fixed interest rate. Repayments are not applicable with the old school method of lump-sum mortgages. Meaning, the interest increases faster as the amount of borrowed is also increasing in time. This is in reciprocal with the process under the normal mortgage. Keep in mind that lifetime mortgage is not the same with the standard mortgage.
2. House renovation
This is mostly applicable for those aged 65 up. With this, the providers grant lump sum for a specific percentage of the home generally at the rate below the value in the market. The nice thing is that the lump sump is tax-free. Further, one can stay at the property, but, in the event that it is sold, the revenues will be divided on the lender and owner’s percentages. In short, when the value of the property increases, the amount it gets also rises.