Equity Release Loans: The Basics

2007-03-08 10:33:40

( Financial )



Equity release loans are similar to taking out a mortgage on your house or property. However, equity release loans are loans that will be paid off when the owner or the last survivor dies or sells the house. Unlike the traditional mortgage, there would be no repayments made until death or if you move into assisted care better known as long term care. After which your house will be sold with some of the proceeds going straight to the repayment of your loan. The balance will be forwarded to your estate.

Homeowners are eligible for equity release loans if they have owned their house usually for more than 50 years. The amount you can take our as an equity loan will be dependent upon the current value of your house. You have the option to take as little or as much as you want from that value. The payout is in cash so you choose what to do with it.

There are several types of equity release loans. The first type is called a lifetime mortgage. A lifetime mortgage is similar to a secured loan with your home as collateral but you retain full ownership of your property. The loan can be in a form of a lump sum or an income often called annuities. Most equity loan providers are even flexible enough to accommodate both lump sum and annuities into one loan.

Another type of equity release loan is called revisionary scheme. Revisionary schemes are loans wherein you sell only a percentage of your property in return for either a lump sum or as guaranteed income. However, if you sell a percentage of your house, you only get a part of the sale price with the remainder going to the lender. The percentage is determined by your age. The older you are, the higher percentage you will receive from the sale price. If you opt for a revisionary scheme, you handover legal ownership to the provider and you become a tenant.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.