The equity of your house is value of your home less any mortgage debt or other debt secured by it.
For the most typical type of mortgage the equity of your home increases when you pay your mortgage and also as your property grows in value overall.
In the past few years, property values in UK have increased. Therefore, if you bought your house a while ago and you are looking to sell it, you may have a decent sum of money.
Here are some examples:
If your home’s value is £350,000, and your mortgage is paid off, you will have equity of £350,000.
If your house is worth £250,000, and you have an outstanding loans of £50,000, you will have equity of £200,000.
If your home’s value is £150,000 and you are owed a mortgage of £20,000 as well as another secured loan from the mortgage lender £5,000, then you’d have equity of £125,000.
The amount of equity you are able to release will be contingent on your age and your personal situation.
Understanding Equity Release
The equity release plan is accessible for those over 55 with a qualified home located in the UK.
Based on your plan depending on the plan, you can take the money in lump sums or smaller instalments. It’s your choice how to decide to spend the money.
The cash you withdraw is required to pay off any mortgage that is owed. The remaining money is yours to spend however you like, such as on improvements to your home or helping your family members.
If you’re considering the use of equity release to gain access to the cash that’s locked in your home, it’s essential to get a clearer idea of the amount you could release and what options you have. We recommend using this equity release calculator from the Equity Release Report. It’s a no-cost tool that requires no personal data to use, that provides you with an estimate of how much cash you might receive, based on factors such as your age and value of your home. You will also be able to get an idea of the amount more you could receive in the event that you qualify for higher rates for medical reasons. Take a look and see what you could be able to release.
It’s a tax-free amount that you can spend however you want.
After you’ve access to your money, you will not have to pay any monthly payments. If you’d prefer to pay off the interest on the loan on a monthly basis, certain plans provide this option.
The most well-known form that is equity release. The remaining amount (plus interest if not paid) is due when you sell your home which is usually the time you die or transition into long-term care.
The types of schemes for equity release
There are two methods to let go of the equity held within your home without the need to relocate.
Lifetime mortgage is the most well-known equity release program, where you can borrow funds against the value of your house.
Home reversion is a scheme where you can sell all or a portion of your home in exchange in exchange for cash
What age do you need to be to get equity release?
To be eligible for equity release you must be at least 55 years old or older. If you’re using an equity release plan jointly for both of you, both must be at least 55 years old.
To get an option to revert your home, you need to have reached 65 old age or older.
There are other factors to consider before deciding whether equity release is the right choice for you.
Does equity release make sense for me?
If you’ve got money stored in your home and you’re searching for an opportunity to fund an easier retirement Equity release is the best option to improve your savings.
It may help to increase your pension or any other income once you retire – and you could make use of the funds to improve or maintain your lifestyle later in life.
You’ll have to satisfy certain requirements in order to be eligible under equity-release plans. Should you satisfy the conditions below, then you might be eligible to:
If you’re over 55, you’re eligible.
You own an eligible property located in the UK
Your home is worth at least £70,000.
In the event that you’re able to have money or other investments to let you maintain your lifestyle and other financial goals when you retire Equity release may not be the best option for you.
What effect does equity release have on the benefits?
It is important to keep in mind that the equity release could affect the benefits you receive and could affect benefits you may be eligible for in the future.
If you qualify for or be required to apply for the benefits that are based on means, they may be reduced or you might not be eligible for them. They include:
Council Tax Support
and Support Allowance and Support Allowance