There are two explanations for equity release. Firstly, if you release money from your home without selling it, the trade-off may be that you lose a considerable portion of the equity value of the house. Or, you can sell the house and retain 100% of the sale price of your property, enabling you to buy or rent something more suitable.
Equity release allows individuals aged 55 and over to release money from the house they live in without having to make any monthly repayments. There are two types of equity release; Lifetime Mortgages and Home Reversion plans. Both of these are regulated by the Financial Conduct Authority. By using an equity release product, a home owner can draw a lump sum or regular smaller sums from the value of their home, while remaining in their home.
Equity release can play a crucial role in retirement funding. If you are thinking of taking out an equity release plan, then you need to find out as much as you can about your options and weigh up the advantages and disadvantages fully before you decide if equity release is right for you. A fully qualified financial adviser should help you to understand the steps involved and talk you through your options, effects it might have on state benefits, tax, and your obligations.
The Equity Release Council is the industry body for the equity release sector.
Source: The Equity Release Council
Reasons for home equity release
365 Property Buyer regularly buy houses from sellers wanting to downsize due to maintenance problems with their current home. Sellers might have cash tied up in the bricks and mortar, but don’t have the funds to maintain and repair their current home. This makes it harder to sell on the open market or to buyers with a mortgage.
During the recession and extended period of financial uncertainty, there has been an increase in younger home owners, professional working couples and families wanting to raise cash and release the equity in their property. This happens for many reasons, including lack of maintenance, redundancy, cost of raising children or separation.
An increasing number of our clients are also selling and moving into rented accommodation. The dream of home ownership is not what they expected, with all the costs, maintenance, mortgage. Sometimes, the threat of negative equity and financial insecurity is just too much for some people to cope with.
Some sellers a cash out and release equity for a very different reason: they want the freedom and flexibility that renting offers. Sure they work hard, but they also play hard – they spend what they earn and find that they have far higher disposal income. So the thought of having no property to maintain and no large equity stake in the form of a mortgage deposit tied up in the house is tempting, and offers the freedom to move where ever and whenever they want.
The equity release process
These situations are where specialist cash buyers like 365 Property Buyer have an advantage. We can quickly exchange contracts and complete in a time scale to suit you – normally, when you have found your next home and are ready to move. We can even provide a cash lump sum until the sale completes.
For many home owners, the preference is to sell, release the equity and retain 100% of the sale price. In many cases, downsizing and equity release go hand in hand. Home owners can pay off debts, clear the mortgage, buy the next house cash and have spare cash in the bank with lower living costs.
If you are looking to equity release to improve your cash flow, then 365 Property Buyer strongly advise that you get a free, no obligation cash offer for your house.