Understanding Equity Release – Thomas & Thomas Solicitors Ltd

Equity release is a good way of giving over 55s the opportunity to release some of the money held in their property without selling it, giving them the freedom to do things they might not otherwise have. -may not have been able to do otherwise. This money could be used to help the family financially, pay off debts or finance the daily costs of retirement. Meanwhile, some homeowners use it for travel or to improve their home or garden. With house prices rising by 73% in ten years, according to the latest figures from the Office for National Statistics, many people have now invested a considerable amount of their wealth in the property they want to benefit from. Equity in your home?

What is home equity?

Home equity is the value of your property minus your mortgage balance. For example, if your home is valued at £500,000 with a remaining mortgage debt of £200,000, you have £300,000 of equity in your property. Equity is accumulated in two ways; paying off the mortgage and increasing the value of the property over time.

How to unlock the equity in your home?

There are two ways to free up equity; lifetime mortgages and home reversion plans. Both choices provide a way to obtain funds for a variety of purposes, such as home improvement, debt settlement, and supplementing retirement income.

What are lifetime mortgages?

Lifetime mortgages offer homeowners a way to access funds, either through a lump sum or regular payments based on the value of their home, while allowing them to maintain ownership of their home. property. Typically, the amount borrowed plus any accrued interest is repaid when the owner dies or moves into a long-term care facility.

Key Considerations

1. Eligibility: Owners must be at least 55 years old. The amount that can be borrowed is determined based on the age of the owner and the value of their property.

2. Interest: Loan interest can be compounded (added to the loan balance) or repaid periodically. When compounded, this means that no repayment is necessary during the owner’s lifetime unless they decide otherwise.

3. Repayment: The loan is settled when the property is sold – either when the owner dies or moves into a long-term care facility. Any equity remaining after the loan and interest are paid goes to the owner’s estate or is inherited by their beneficiaries.

4. Guarantees: Reputable lenders ensure that homeowners never owe more than the value of their property with a “no-equity guarantee.”