Equity Release

Euity release is a popular choice for homeowners who want to raise finance.

This can de done simply by Remortgaging or alternatively with any of the 3 equity release schemes below. The equity released from your property could be used for home improvements which would add more value to the property.

The equity released could also help offspring to finance their way up the property ladder. A parent can remortgage their own property in order to raise the cash required for a deposit on a property for their sibblings.
If mortgage repayments are not kept up on a property then that property and any other that has been used as security will be at risk. It could be your home you stand to loose and non payments will adversely affect your credit status.

Before taking any of the below options think carefully about it before commiting and read all paperwork carefully. PeopleFinance.co.uk provide details on Remortgages and can help you find a remortgage. We have named other schemes for your comparison only.

Remortgage
Equity is released by taking out a Remortgage on your property. To remortgage you basically take out a new mortgage on your property, usually one that can offer you better terms, rates conditions etc. You could remortgage in order to increase the term of the mortgage or you could even decrease the term you wish the mortgage to run for. You can remortgage in order to release equity in your home, this means that should your home be worth considerably more than the mortgage outstanding on it, then you could remortgage for a larger sum and use that money for whatever purpose you wish. It is worth writing a will in order to protect the investment you have in a property, you may wish relative to gain should you die unexpectedly.

Home reversion schemes
The scheme consists of selling part of your property in return for a lump sum. Even though some of the property is sold off the right to live in it is kept by yourself until your death. When death occurs the deceaseds property is sold and the percentage that the lender is owed is repaid. Normally a UK home revision scheme releases finance between 25% - 90% of the value of the property. Any profit after this would go to your family or beneficiary.

Mortgage roll up plans
Mortgage roll up plans usually mean that a regular income is received by the borrower rather than having a lump sum and as with home reversion shemes the outstanding balance on the loan is repaid when death occurs.
A loan is taken out, which is secured against the value of your property. There is no repayment of any interest or the initial loan amount until the property is sold. When the sale is complete, the proceeds are used to repay the initial loan amount plus the accumulated interest. Any excess will be returned to your estate.
It should be noted that interest is compounded on a roll-up mortgage and the debt can increase quite quickly over the years. Very often, this means that the percentage of the total property value that can be borrowed is relatively low.

Home Income Plans
Home income plans allow homeowners, especially the elderly, to release equity which they have built up in their home without having to sell it.

The answer is a re-mortgage. By increasing the size of their loans, borrowers can release capital which then goes to buy an income.

There are two types of home income plan - reversion and annuity.

• Reversion : Through this route, the home is sold to an insurance company which pays an income to the owner. When the owner dies, the life insurance company becomes the owner of the property.
• Annuity: With this scheme, a mortgage/remortgage is secured on the property. The proceeds are used to purchase an annuity to produce an income. The ideal situation is for a portion of this income to be used to service the debt. Then, on the death of the homeowner , the debt can be repaid. As with all annuities, the older you are, the higher the income you can achieve. For this reason, home income plans are more likely to be appropriate for people in their 70s.

All Home Income Plans involve risk. The value of your home could fall, mortgage rates could increase sharply so they"re probably only desirable for people who need that extra income and have no other way of getting it.

UK Equity Release Schemes and Retired People
Retired people can use this scheme to create finance or an income. A lot of companies do these types of policies, however due to the nature of them it pays to be cautious before entering into one.