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Title: The Equity Release Market
Author: Michael Sterios
Article:
Equity release is a way for homeowners to release cash from the
equity that has built up in their home. Equity can be defined as
the difference between the value of a property and the balance
of the mortgage, or any other finance, that is secured on it.
There are several different methods of equity release available
to homeowners. This can include releasing all or part of the
equity they have built up in their properties either as a lump
sum, a drawdown facility, or as a steady cash flow over time.
There are two main types of equity release plans - lifetime
mortgages and home reversion schemes. Both of these schemes are
only available to home owners who have built up a sizable amount
of equity in their properties.
A lifetime mortgage is a form of equity release whereby a
mortgage is secured against a person's home after redeeming all
other finance secured on it. The equity release can occur as
either a lump sum, a drawdown, or as a regular income over time.
With this form of equity release, no interest is payable during
the term of the lifetime mortgage. The interest payments will
instead roll up into the balance of the loan. The balance of the
loan is repayable when either the property is sold or the
homeowner moves into long term care.
Home reversion schemes, on the other hand, are a type of equity
release that requires the homeowner to sell all or part of their
property to the scheme provider. The homeowner will them receive
a lump sum payment as their equity release and will usually
continue living in the property whilst paying a minimal amount
of rent. When the property is eventually sold the reversion
scheme provider will take their share of the proceeds and pay
the balance to the homeowner or to their estate.
The equity release market is expected to grow considerably over
the next few years. As more and more people become concerned
that they have not saved enough money for retirement they are
looking to their home as an asset that could potentially provide
the funds required.
Homeowners have benefited from many years of above inflation
growth rates in the property market and have therefore
accumulated large sums of in their homes due to natural
appreciation that they can put to use through an equity release
scheme. Many homeowners have also paid of all or most of their
mortgages, providing even more releasable equity. While this
does build up personal wealth, it does not provide cash to pay
for things unless the equity is released through one of the
schemes detailed above or the house is sold.
Equity release schemes can have an impact on state benefits and
inheritance tax. It is therefore a good idea to talk to an
Independent Financial Adviser or mortgage adviser before
entering into an equity release scheme. For mortgage advisers to
provide advice on lifetime mortgages they must complete a
special qualification. This helps to ensure that their clients
receive expert advice on this topic as equity release is a
serious action to undertake.
About the author:
Visit <a
href="http://www.ukmortgagesource.co.uk">www.ukmortgagesource.co.
uk</a> to submit your details to a panel of independent <a
href="http://www.ukmortgagesource.co.uk">Mortgage Advisers</a>
and receive expert and impartial advice on UK <a
href="http://www.ukmortgagesource.co.uk">Mortgages</a> today
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