How To Benefit From Home Equity Release
Many people are looking at utilizing their homes for the purposes of pension planning. People are able to use home equity release to access money from their homes while they are still living in the homes. There are many factors to consider when doing this and people need to understand the pros and cons before getting involved in it.
This term refers to the process whereby people are able to release equity that has been built up in their homes over a period of time. There are however a number of ways that this can be done and it can become a little confusing. Most people understand this process as borrowing money against the equity in the home. Another way to describe it, is by taking an advance on the mortgage.
Many people who are still working will take out a second mortgage which increases their debt and gives them increased cash-flow at the same time. They will often do this to pay off any short term debt and lower their monthly debt repayments. Equity release is aimed specifically at retirees that have many assets but are slightly cash strapped.
These schemes permit owners to borrow or sell against a section of their homes in exchange for money that they can use to spend for the remainder of their lives. In this type of transaction, homeowners are not required to pay the money back while they are alive. Likewise if part of the house is sold, the company cannot claim the money until the homeowner dies or sells the home.
There are more than twenty companies that deal with this kind of finance and they offer forty different kinds of plans. The criteria may very from company to company but for the most part clients need to be aged between fifty five to sixty. They must be looking to raise a minimum amount and this will vary from company to company. Customers need to inquire at the specific companies just what these amounts are. Naturally, there must be sufficient equity in the home before any borrowing can be done.
The property must be a freehold one and must be made of typical brick and mortar. The property must be in good condition and there can be no tenants living on the property. The homeowners must be able to reside in the homes for as long as possible.
Homeowners can mortgage a part of their home to a level that is related to their age. Older people are able to mortgage higher amounts. A sixty year old may be able to access twenty percent of the value of the property while a ninety year old will be able to access as much as fifty percent of the value of the property.
Younger people are expected to live longer and this means the interest bill is potentially greater. Money can be taken as a lump sum or in monthly installments. Home equity release money is tax free no matter what option is taken out.
