Category - Equity
Having a home means having a considerable amount of capital value. And that’s what equity release is: using that capital value for another purpose. However, the twist here is that you are still able to live in your home. Usually, you’ll sell your home on but be permitted to live in it for the rest of your life.
The capital you receive can be paid out in a single lump sum – or, you can choose to receive it in installments. Lots of people approaching retirement may choose this option. It can be a good way of supplementing the income that you receive from your pension.
Equity Release and the Lifetime Mortgage
A lifetime mortgage is a type of equity release that doesn’t work like a standard mortgage. This type of mortgage is one where you don’t make any payments – at least while you’re alive. However, the interest grows very quickly in an increasing sum. The interest is added to your loan and loan amount. Payback happens when you either die or go into long-term care.
- The lump sum: As mentioned before, you can receive a lump-sum. This is the most popular form of equity release.
- Drawdown: You receive less money with a drawdown scheme. The rest is then banked and you have access to it whenever you like, until the amount is used up.
Other things to know
With this type of scheme, most lenders will set a minimum age of 65. There are different levels of value that you can borrow from your property, however the maximum is 60% of the property’s value. The percentage, however, does increase the older you get. But always remember: you can expect to find different thresholds depending on the provider you go to. In addition – you’ll still have to maintain the property as it will undergo inspection every couple of years.