Make your Property Pay

Equity release refers to the process by which home owners raise needed funds from their property, either in the form of a regular income or as a lump sum. Considering the fact that returns on property over a period of time tend to generally increase, this option of utilizing the home as a means of raising money has seen a relative rise in popularity in the UK, particularly among the retired or soon-to-be retired property owners. Basically, equity release is a means for the owners of the home to unlock the asset that is their property. This is especially true when retirees are concerned about their ability to adequately finance their lives when the pension and other forms of savings might not allow them to live the sort of leisurely and comfortable lives that they might want to live after they retire. Entering such an arrangement will give them access to the increased value of their homes through ready cash that they can opt to receive at once or in instalments, even while they continue to reside on the property until they either move or pass away.

There are two types of equity release scheme in the UK and they include the home reversion scheme and the lifetime mortgage . The lifetime mortgage allows the property owner to obtain a loan against the value of the home, with added interest that will be included in the value of the loan. In the eventuality that the home is sold, the interest and the loan will be repaid, meaning that there is a very likely chance that the value of the original loan will increase substantially over an extended period. The outcome of this is that the estate will likely have little left after the sale of the property by the time the interest and the original loan are subtracted from the sale price.

On the other hand, the home reversion plan makes provisions for the property owner to sell a percentage of the interest in the home at a price that might be less than the actual current market value of the home. In the event of the sale of the home, the home reversion company would still only get the exact percentage of the sale price. For instance, if 70 percent of the home is sold, the home reversion company would get 25 percent of the final sale amount. The choice of what plan to use is up to the property owner who would do well to work with an independent financial adviser in order to decide what route would be the best for the individual circumstances. Another tool that can also come in handy is an equity release calculator that basically allows the homeowner to discover how much cash he or she can expect to release from the home.