Normally, older people dream about living a peaceful life after they retire. They hope for a strong economic security, a gorgeous house and plenty of valuable time to treasure those calm moments with their family. However, the more you get older, you find it quite tough to fulfill your dreams. Cost of living has multiplied considerably and the salaries are still constant, not rising with rising inflation. Moreover, the prices of real estate sector are soaring high. However, since the home prices are growing progressively from past few years, this has greatly been advantageous to a lot of home owners since the equity generated because of high prices of homes aid them lead an excellent life.
Equity release helps the home owner to retain the use of their house and at the same time getting constant income through the higher value of home. The chief advantage is that they can pay back the income provider afterward, usually after the home holder expires. With the help of equity release option, the home owners who don’t want their heirs to own their property, can enjoy the benefit of this choice with equity release option.
Some advantages of equity release option are:
– Tax exemption on a large sum of money attained. This money can even be steady pay, known as annuity, for your remaining life.
– Your real estate is levied lower tax.
– If there is a collapse in estate sector, the person who borrows is totally protected due to NNEG-No Negative Equity Guarantee.
– The borrowers do not have to refinance mortgage at lesser costs, if there is a fall in rate of interest.
The drawbacks of equity release option are:
– Your family will get lesser amount of inherited money after your death. These can take place merely if the property value rises at slower rate than interest rate on the mortgage.
– The amount that you can contribute to some charity, reduces greatly.
– Besides, a UK homeowner might not be proficient to enjoy all the advantages that are granted with equity release option.
In UK, lifetime mortgage is a type of equity release plan which is highly popular as the homeowner enjoys extra equity. But the houseowner should pay full sum for the existing finance and this payment is carried out with the earnings of equity release. The homeowners can access the equity as it is greater than the amount due on present mortgage. Every month the interest builds up and becomes higher than the amount that is payable on the lifetime mortgage. The homeowner or the last spouse in the home is not obligatory to pay back for the interest and proceeds.
A reversion proposal is diverse from entire life mortgage. With this option, the homeowner has to sell off the entire property or part of his property to the income provider. The income giver in turn offers the privilege to the to live in the house for his entire life. There is interest accumulated in this plan.
Pensioners and retired people are major recipients of equity release options. For this, the homeowner should be a senior citizen, that is, should be of 55 years or above.