The Ins and Outs of Equity Release Loan

by Zara Hyatt Freelance Blogger

The need for money and finances remain to be prominent throughout your life. Equity loans are a way of granting loans to homeowners who can use their houses as the collateral that is counted against a new loan. It can be termed as a new loan offering huge amounts of money that the homeowners can cash out against the valuation of their house.

The money that you receive with this loan is almost equal to the actual valuation of your house after the mortgage that you are yet to pay is deducted. This scheme is a special one which allows getting a big sum of money while still allowing you to live in your house. A key benefit of this loan is that it can help in paying for large expenses in later life, including long-term care and so on. But it is always very crucial to move forward by taking the help of an Equity release Loan Consultant.

How is The Loan Availed?

The working of this type of loan is fairly simple to understand. The loan provider will provide you with an equity release loan in the form of a lump sum amount or as an income in return for part of the valuation of your home. The value can be received by either mortgaging your house or by selling a portion of your house by being under the condition that you will get to live in it. Depending on the conditions, the types of equality release are discussed below:

Lifetime Mortgage:

Among the most popular type of equity release loans, this scheme allows you to receive a lump sum amount of money by mortgaging your house. The amount that is loaned out to you by mortgaging is paid back to the provider by selling the house upon your demise or when you move into long-term care. Under this specific scheme, the complete loan to value has been revised and changed to 60% of the total value of the property.

The interest against the loan amount keeps on increasing and the amount you owe to the provider grows as well. But this amount can be reduced by paying off the interests eventually. If you refuse to pay the interests, the due amount grows with the interest compounding over time and you will have to pay much more. But, you can still opt for the ‘no-negative-equity-guarantee’ where the provider offers to ensure that the debt will not be beyond the total valuation of the house.

On the other hand, if you happen to have any sort of serious health condition, you may even qualify for borrowing more money or paying lesser interest.

Home Reversion:

Under this scheme, you get the provision to sell a part of your house or your whole property. But on the other hand, with the help of an Equity release Loan Consultant, you get the legal right to live in the house until your demise or until you move into long-term care. You can choose to receive the amount as a lump sum or in the form of a regular income, just as you would prefer.

For a lot of home reversion equity loan providers, the loan applicant shall be 70 years of age. Generally, this scheme follows the principle is the higher your age is, the more money you are likely to receive. But, it should be noted that you will not be receiving the exact market value of your house and thus while making the decision, you need to keep it in mind.

In addition to that, the condition of your health is also taken into account and if your health condition happens to be poor, you will receive a greater share of the total value of the property.

Will Opting For Equity Release Loan Be A Good Idea?

One of the key benefits of this loan scheme is that the scheme enables you to have money to spend in the present time, rather than being unusable in your property. With the surging prices of properties and houses, a lot of people have the majority of their wealth stuck in the form of their property. By consulting with an Equity release Loan Consultant, you can deduce the price of your house and access the worth of your property in the form of cash.

This method not only allows you to use your property for paying off your long-term care costs, but also allows you to be independent.

Who Should Apply For This Loan?

The reasons why equity release loans may be beneficial for you are as follows:

A major reason why most people go for equity release loans is the lack of resources or savings. If you do not have any source of income or your savings and the income are not enough to meet your needs after retirement.
If you have no beneficiaries and/or you do not have any issue regarding reducing your family’s inheritance.
Downsizing is not an option for you.
Taking the expert advice of Equity release Loan Consultants who have suggested that this is the best option for you.