If you require urgent cash (perhaps to carry out some home improvements or renovations), equity release can be a suitable method of obtaining it. When you have a valuable asset such as a home, it can make sense to use it as a source of funding when cash is required. Many people are unlikely to have an asset which is worth as much as their house.
What is Equity Release?
Equity release refers to receiving money up front, against the current value of your property. There are different options available to people wanting to get equity release and therefore different methods to choose from in terms of how the money is borrowed. The two methods are discussed below:
If you are aged over 55, a lifetime mortgage can be obtained, where you borrow a proportion of the house’s value from a reputable lender. This can work out extremely well for you as the interest charged on your home does not need to be paid back until you sell the house or you die. That said, interest is charged at (currently) a very steep rate and so it is important that you get the best deal for you, prior to chasing a lifetime mortgage.
Home reversion is when you receive money up front, for selling a share of your property back to the lender. Whilst this is a good way of obtaining cash, your sale back to the lender is often done at a rate that is less than the market value for your property. In order to take out a home reversion agreement, you must be over 65 years old. What is good about a home reversion, is that you are able to remain in your home for as long as you wish.