Most people who have owned their homes for several years have some equity built up. Equity is essentially a financial asset in the amount you’ve already paid into your mortgage thus far. Many people need to access this equity at some point in time, most commonly to take care of an emergency. While you would usually have to sell the house or refinance it, there are other ways you can access the equity without taking those steps. Here are some of the different equity release schemes available to homeowners.
Most lifetime mortgages allow you to access the equity you’ve built up in your home by taking a loan out and using your house to secure it. This allows you to take out the cash you need to take care of an emergency without losing your house.
The original loan will be repaid when the house is sold in the future. If you have to enter a nursing facility, or if you and your spouse die, you won’t have to worry about debt collectors chasing after your extended family. If you have additional questions, you can go to a Responsible Equity Release location nearest to you in order to get more information about this type of lifetime mortgage. However, there are other types of lifetime mortgages available as well.
Drawdown Lifetime Mortgages
This is similar to a regular lifetime mortgage, except you don’t have to take out the cash you need all at once. Instead, you can get the equity released by taking out smaller loans periodically. This way, the loan only accrues interest on the money you took from the available equity, which helps you reduce the overall costs associated with this scheme.
Enhanced Lifetime Mortgages
If you need more money than is available through a traditional lifetime mortgage, some companies offering equity release schemes also offer enhanced lifetime mortgages. While approval can be difficult to obtain for people with serious health issues, such as diabetes or high blood pressure, or for those who smoke, it can be a good way to meet your needs if you’re in good health.
Protected Lifetime Mortgages
For people who want to leave their loved ones with proceeds from the sale of their property, a protected lifetime mortgage can help them do so. While you don’t have to take all the equity out of your house with a traditional lifetime mortgage, many people do so and then when their home is sold or after they die, every dollar goes to repay the remainder of the loan. With a protected lifetime mortgage, you will be able to leave an inheritance for your children or grandchildren.
Interest Payment Lifetime Mortgages
This scheme works in the same way as a traditional lifetime mortgage. You can release the equity in your home with a loan, but this version allows you to make monthly payments on the accruing interest. The main advantage of the interest payments is to reduce the amount of money the equity release lender takes out of the house when you decide to sell.
Most schemes are only available to those aged 55 and over, and in some cases, the scheme you have may be transferable if you sell a house and buy another one. Before considering an equity release scheme, you should consult with a reputable financial planner.