When you invest in a property, you are gaining equity which can prove to be helpful to you in your retirement period. Equity is the value of your property less any outstanding loans or mortgages. It is possible to release equity from your property through equity release schemes. But what is equity release ?
Equity release is offered by equity release providers as a way to help you to unlock the equity that is tied up within your property. In order to release equity from your home, you need to know how much you are able to release. Most equity release providers do not allow you to borrow more than fifty five percent of the total value of your property. For example, if your property is worth £300,000, the standard maximum you would be able to borrow would be £165,000. To achieve this high loan-to-value you would need to be age 85+. For younger ages the LTV's are lower as life expectancy is longer & hence the roll-up effect significantly greater.
When you are applying for equity release, you need to make sure that if there are repayments that you are capable of paying them. Your current financial situation may allow you to make repayments which can have its advantages for your beneficiaries. Repayments are normally required for interest only lifetime mortgages from companies such as Stonehaven, who offer the facility for borrowers to pay interest every month.
Some equity release providers offer you a one-time lump sum, while others offer an ad-hoc withdrawal facility called drawdown. Some providers offer you both. Before applying for equity release, it is advisable to get legal as well as financial advice. This is important because equity release has serious implications on your estate & professional advice must always be sought. In fact most lenders will only accept applications from approved equity release advisers.
Some things to take into consideration when applying for equity release are as follows. Your property must be insured and must be properly maintained. If for any reason it is not properly maintained, the equity release provider has the right to inspect the property & administer improvements, the costs of which would be added to your equity release balance. In such cases, you will be repaying the initial loan amount, the interest amount, and the repair costs once the mortgage expires. If for any reason you permanently move out of your house, the equity release provider will require you to sell the property so that the loan can be repaid. Most companies provide a 12 month window within which the property should be sold. Do not forget that there are costs involved when applying for and obtaining equity release so always consult a specialist such as Equity Release Supermarket.