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The Most Popular Uses for Equity Release

Collateral release schemes have the potential to unlock a tax-free lump sum from the value of a homeowner's property to help supplement income in retirement. However , what are the most common uses for releasing equity from your home? Because these particular schemes discover a lump sum - in most instances - homeowners generally use the money to make one-off purchases or transactions. Listed here are some of the most popular reasons for releasing equity. Clearing Debt Mounting debt can have a major impact on a household, especially after pension. Managing the monthly repayments with added interest can take a considerable amount out of a retired homeowner's pension, or financial savings put aside for retirement. By releasing equity, a homeowner can clear any outstanding debt, freeing themselves with large monthly repayments and allowing them to enjoy the income and money they have. Paying Off the Mortgage Much like clearing credit card debt, paying off the mortgage using a release scheme can ease the burden of having to make monthly payments. It might seem strange with the existing equity in your property to pay for the rest but - in the case of lifetime mortgages - you will continue to own 100% of the property. Improving Lifestyle Enjoying retirement is important - after all this is what you have worked for your whole life. This is why a few homeowners release equity so that they can afford a lifestyle that they want. This might include numerous holidays, regular purchases along with the freedom to do what one wants. One-Off Luxury Purchase Paying for that once-in-a-lifetime holiday or buying a new vehicle is very popular for homeowners wanting to treat themselves using an equity release scheme. Help Family Members Another use of collateral release schemes is for parents to help their family out. One of the most common reasons for this is helping their adult little ones get on the property ladder. This has become more pertinent in light of the recent economic climate. :: Equity release could affect should never or future entitlement to means-tested benefits :: Releasing equity to spend in your lifetime can reduce the amount that is departed in your estate when you pass away :: By consolidating your existing unsecured debts, you may extend the term and overall charge of these debts.

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Equity Release Schemes Launch To Help Landlords in the Buy to Let Mortgage Market

Pursuing the recent addition to the equity release market of more2life & New Life Mortgages in late 2010, we have now witness the launch of an innovative landlord mortgage which signals a degree of diversity to their lifetime mortgage account. New Life Mortgages had temporarily withdrawn from equity release market in 2009. It can be seen they have not ended up idle during this period, but instead waited for an opportunity to re-enter at the right time & with the right products. Following with from my previous article on New Life Mortgages rejoining the equity release market in November 2010, here we discuss the features & benefits to landlords of this unique equity release plan. How does this scheme work? The New Life Mortgages Landlord scheme provides a tax free cash lump sum which is based on a share of the value of the residential property & the age of the youngest applicant. Plans begin age 55 & some sort of landlord with a portfolio of upto 5 rental properties can release a percentage of the equity owned within these. This form of buy to let mortgage has NO repayment date & NO monthly repayments of capital to produce. The loan is finally repaid on the sale of the property which would be when the last surviving borrower comes with died or gone into long term care. How do I qualify? · The minimum age is 55 (for joints applicants minimum age 55 of the youngest) · The investment property must be in England & Wales · Minimum property valuation of landlord loan is £100, 000 & maximum of £1million · The minimum amount release is £25, 000 & maximum is £500, 000 · Property should be standard construction & residences over 5 storeys are excluded · If a leasehold property then 80 years must still be remaining relating to the lease · An existing mortgage must be repaid at the start of the Landlord scheme What amount can be borrowed? This is estimated on the age of the youngest owner & the valuation of the investment properties: - Age 55 - 16% Age 60 - 21% Age 65 - 26% Age 70 - 31% Age 75 - 36% Age 80 - 41% Age 85+ - 45% As an example - a 65 year old investment landlord owning an investment property valued at £200, 000 could release a capital lump sum of upto £52, 000. How does the landlord scheme compare to a normal lifetime mortgage? The scheme principally affects the same. The capital is usually raised, interest then accrues & compounds on a monthly basis and then it is repaid when the property is finally sold. That differences lie in the rental aspect of the scheme; an existing assured shorthold tenancy agreement must be in place for training course & the property should not be rented to family members. Also, there are maximum borrowing criteria, similar to a buy to allow mortgage. This states that the monthly interest which is charged cannot be more than the rental income received. What are the bills involved? · Valuation fee is dependent upon the value of the investment property · Application fee and can be added to your loan · Solicitors & additional legal fees · Fixed monthly interest rates - 6. 39% (age 55-80) & 6. 55% (age 81+) · Early repayment charges are 5% for the first 5 years. Virtually no charges after 5 years. · An advisor fee charged by your equity release specialist Practical uses in the New Life Landlord buy to let mortgage? The equity release funds can be used for many purposes. Evidently there are actually market opportunities arising in the rental market & can be seen as house prices reduce & rental yields need increased. Many bargains are there to be seen. Should any residential landlord wish to increase their property portfolio, but have got concerns over the expenditures in set up costs of buy to let mortgages then the landlord scheme can be considered. Some sort of potential landlord, who witnesses a new investment opportunity, but alas has limited funds for deposit, then the landlord equity release scheme could help. The borrower should assess the values of all properties under his buy to please let portfolio & by using the equity release calculator can establish how much equity can be released to bridge any weakness required. Another example, with the 55+ age group who are eligible for this buy to let mortgage could be several overtax implications. Should some of the landlords assets require disposal, in preference to selling the property & incurring capital gains tax, than the landlord plan can be applied for instead. Finally & the most common purpose for this scheme could be debt consolidation reasons. If some may be experiencing financial difficulties with repayment of a buy to let mortgage or other personal finances, then subject to the quantity that can be raised, then these debts could be repaid. Alternatively, the landlord could just had enough of having to pay the buy to let mortgage, but would rather be in receipt of the gross investment rental income which can in that case provide extra disposable income in retirement? Whatever the reason for a landlord releasing equity, ensure you always obtain unbiased advice from a specialist & regulated by the FSA.