The process of releasing money or equity out of a primary residence without moving out is called ‘equity release’. Seniors who desire to free up money for different purposes choose this method as it allows them to have money in their pocket which they can use for different purposes. If you are living in the UK, you can arrange to get equity release as early as when you hit 55 years, but there are also limitations since you can only release so much at that age. Ideally, the older you are the greater the lump sum you get from equity release loans.
The main reason why people choose equity release loans is to raise money, which in turn will help improve their standard of living. The reasons could be for a multitude of different purposes, ranging from home improvements, helping the kids, holidays or even having an emergency fund in the bank.
In the past, people used to release equity to enhance their pension, go on holidays, and make their retirement years much more pleasurable. If you have a major project that requires cash in a lump sum, this will be a great idea; for instance, buying a second home in the UK or abroad, or to simply enhance your retirement package.
Other people take up equity release loans for real life situations that need accomplishing. For example, there are those who take up the lump sum to pay off a mortgage and consequently increase their monthly income, while a long waiting list for a hip replacement or other similar surgery may prompt one to take up equity release.
You might also choose to use the money to help family members buy their first home, do your own home improvements, or replace a family car. You can also choose to invest the money in property abroad which then allows you to travel away and have time with your children, especially if they are not living close to you. You might also consider buying a motor home and having fun travelling all over. The principle of equity release is to have money and spend it on what you want.
When people choose this option of raising funds, usually they do not have any other options left, or the other options are too expensive or inconvenient. In its infancy, people tended to use equity release for lifestyle reasons which effectively were optional and not a necessity. However, more and more seniors today are using the equity release facility to enhance their pension, or to fund their long-term care or help their children in financial crisis or for business purposes. These new era requirements have become more of a ‘need’ rather than a ‘want’ in the current economic climate.
Given this era of need you will definitely want to compare the different plans that exist. You may find that there is one solution that best fits your requirements. You may be older than 55 and wish to have more money released than a person would get at this age. Perhaps you have a health issue? If there is something attacking your longevity, there is a solution.
You can take out an enhanced lifetime mortgage. You receive a larger lump sum than you typically get. You also have the funds to make your life as comfortable as possible. If you are not taking out a loan to help pay for your expenses or help your children out, consider an interest only lifetime mortgage.
An interest only lifetime mortgage is designed to make taking out equity cost effective. You pay the interest that accrues each month on the loan. You do not pay the balance like any other option; however, you also do not add more to your principle balance. This keeps it at a reasonable level and an inheritance for your family.
Once you reach 65 you have an alternative to equity release loans in the form of home reversion. This option ensures you do not owe any more debt now that you are in retirement, but you do have cash to spend. You just have to sell your home, not always something most retirees are comfortable with, but still it is a choice.
Before one embarks on an equity release plan, it is important that they involve an independent financial adviser who can guide them on the best equity release method depending on their own unique circumstances. Generally, people aged above 55 and who own a property can use equity release loans, and the amount of money released will largely depend on their age and their health condition.