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How Can Equity Release Help You Enjoy Your Retirement

Since living costs rise, and the shortfall in adequate pension provision hits home for many now reaching their pension, schemes that allow you to release the equity in your home are forecast to increase in popularity as many look towards the benefits in their homes to cover that shortfall. A growing number of pensioners as well as their children now consider Equity Release as a realistic consideration for those wondering how to maintain or improve their quality of life in retirement. Indeed for a lot of children over the age of forty, their parents enjoyment of life and quality of life in retirement is far more important than receiving an monetary gift. For those considering equity release, the following is intended as an initial guide. Equity release is the term used to encompass just about all financial products that are used to release home equity, without the need to meet an ongoing monthly payment for those aged 55 or over. The products fit in two main categories which are Lifetime mortgage / Equity Release Schemes and Home Reversion Plans. Lifetime house loan products are the most common equity release product available. Lifetime Mortgage providers provide a maximum lump sum dependent on your real age and the value of your property. The agreed maximum equity release can be issued either as, a single lump amount, a lump sum plus ongoing monthly amount, or as a minimum lump sum at outset followed by some sort of drawdown facility. Drawdown schemes are lifetime mortgage schemes where you only take the minimum lump sum needed by the lender, with the balance of the agreed drawdown facility being available for release in the future as and when required. A few conditions and limitation apply to drawdown equity release calculator, but in general they provide a much more cost effective approach to releasing equity in your house. All lifetime mortgages have interest added to the amount borrowed, and generally at a fixed rate of interest for life. This level then builds over time until the outstanding balance is repaid, which is either upon sale of the house, a move into extended care, or when the last surviving applicant passes on. The maximum lump sum available differs between the different collateral release providers, but as a rough guide, for someone aged 75 with a property value of £220, 000 a lump sum of around £94, 000 would be possible. This money is then available to spend as you intend, with the most common reason for equity release being to help ones children now when it is of more benefit, rather than primed. Releasing equity in your home is not the definitive solution however. It can be helpful in certain circumstances but is not right for absolutely everyone. It is recommended that anyone considering an equity release mortgage seek specialist and independent Equity Release Advice so that all the positive and negative aspects have been explained in full. Some of the positives are: No monthly payment Fixed rate of interest for a lifetime Flexibility to draw equity as and when required can reduce the speed at which interest rolls up against the capital unveiled. No negative equity guarantee Portable - you can transfer the mortgage to a new property subject to lending factors, and sufficient equity existing in the new property. The loan and interest are repaid usually from the sales of the home, when the customers die or leave their property because they need long-term care. You retain full ownership in the property and can live in the property for life. Can reduce the amount of inheritance tax liability. Can provide assistance now for the progress to the quality of life. Lifetime mortgages as from October 2004 have been regulated by the Financial Services Authority. Some of the poor are: Releasing equity can effect your entitlement to means tested benefits such as Council Tax Benefit together with Pension Credit. As time goes by and interest rolls up against the loan, it can restrict your ability to switch house. Releasing funds will reduce the value of your estate and the amount that can be left for your heirs There is constantly a minimum lump sum that has to be taken, even if not required at outset. Any existing mortgage needs to be repaid in the funds available. Any release of a lump sum above £10, 000 could reduce an entitlement to suggests tested benefits, unless immediate capital expenditure is foreseen, or a period of Income Assessment is still in force. Releasing Collateral in your home is an important decision and one where the benefits of receiving independent specialist advice is without question. The limited overview provided here just scratches the surface of all the possible scenarios that should be considered before reaching a decision on gemstone right for you. Fortunately consultations with specialist equity release advisers are readily available in the marketplace without cost these days, and so everyone considering equity release should take full advantage of the information available so that a well informed decision can be reached.

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Equity Release - A Quick Guide to the Different Schemes

Collateral Release is the term used to describe a financial solution that is available in the UK for those who are 55 or over. The term again covers the financial sector, with Equity Release Schemes, Lifetime Mortgages and Home Reversion Plans being that products that are available. The first thing to note is that equity release schemes, equity release mortgages and lifetime mortgage are generally one in the same thing, with the terms being used interchangeably. Each of these products refers to a financial product that releases profit for homeowners aged 55 or over. The money is released from the  equity in their property, with the amount being good property value and the age of the youngest applicant. The amount that can be released starts at around 21% for those previous 55, and increases at approximately 1% per annum up to a maximum of 56% at age 90. The maximum amount readily available drawdown will change between providers. Essentially all equity release schemes operate by releasing a lump sum that could be spent however you wish. Now this may be for home improvements, to supplement ongoing pension income and state positive aspects, for the holiday of a lifetime, or simply to assist your loved ones such as children or grandchildren. The options available when releasing collateral are either as a maximum lump sum as per the previous percentages, or as a minimum lump sum around £10, 000 with the balance being made available as an equity release drawdown facility. Equity release drawdown is usually set for a minimum release of between £2000 and £2500. After you have released funds, interest is rolled up against the asking for, generally at a fixed rate of interest for life. This means that you know from outset exactly how the debt will increase over time. For example a group sum of £10, 000 at a fixed rate of 7% will grow to £19672 after 10 years, and £38697 after 20 years once the rolled up interest is added to the original borrowing. Compare this to a lump sum of claim £30, 000 which would grow to £59, 000 over 10 years at a fixed rate of 7%, and the selling point of equity release drawdown option is clear to see. It is worth noting that different providers offer the option to protect a percentage of the property for those wishing to protect an amount for inheritance, i. e. protecting 50% of the property value. The following certainly provides peace of mind, but will reduce the maximum amount that can be released from the property as the aforementioned percentages may be based on the reduced amount of the unprotected portion of the property. Equity Release Lifetime Mortgages really can provide a solution for those which were asset rich but cash poor, and can make the difference between just getting by, or actually experiencing and enjoying retirement and old age. They're not for everyone though, and obtaining advice from one of the many equity relieve advisers in the market is to be recommended. This will help provide you with an appreciation of both the pros and cons associated with Equity Release. For instance: - Pros You can remain living in your property for the rest of your life There are no monthly payments to be made The debt is usually repaid only when the last surviving applicant passes away, the property is sold, or a move into long term care. No negative equity ensures ensure you can never owe more than the property is worth Cons Releasing equity can affect entitlements to means tested benefits. Since interest rolls up over time, the reduction in equity could make it difficult to move home, or downsize. As the attraction rolls up the amount that can be left to your beneficiaries reduces. Home Reversion Plans Unlike Lifetime Mortgages where people retain complete ownership of the property, Home Reversion Schemes work on the basis that you can sell anything from 20% to help 100% of your property to the Home Reversion Company, with any amount not sold, being held in rely on. Home Reversion is only a small part of the Equity Release market, as many people view them as being poor value. Using other equity release schemes you benefit from any capital growth in the property as you retain ownership, whereas after getting sold a percentage of your home to a reversion company, any increase in the value of that portion belongs to them alone. Much like all financial products there is rarely a perfect solution, and so taking time to review all the information available to you is likely to be time well wasted.