EQUITY RELEASE LOANS: AN OPTION TO AVAIL LUMP SUM OF CASH

2007-03-08 10:33:40

( Financial )



Many people are still sceptical on taking equity release loans due to the history of eviction threats it caused during the 1990s. Self regulation of the industry makes it better financial option with lesser threats of evictions and negative equity to the borrowers. Just make sure that you borrow with lenders who are members of a self regulation group to avoid getting into future problems with your equity release loans.

Equity release loans are types of equity loans which requier you to release capital on your home and repayments are made after your death or after a specified period. Your age and the value of your property determine the amount of equity that you can release from your property. The lender gives you the cash equivalent to the equity that you released from your property. The proceeds from equity release loans can be used to fund home improvements, investments or retirement plans.

Homeowners aged 55 yrs old and above usually prefer equity release loans as an option to generate cash without encumbered with monthly repayments. The amount of cash released will be paid by the proceeds from the sale of your property. In the interim, you continue to own your home until your death or until you are admitted to a long term care facility.

Interest rate for equity release loans are calculated as a percentage of the cash paid to you by the lender. You can arrange for the loan to be capped to protect against rising interest rates. A negative equity guarantee can be arranged to protect you from the falling property market prices. You can also move house after arranging for the sale of the house you get an equity release loans and have the proceeds of the sale pay for the loan.

Equity release loans are not for everyone. It is sometimes inflexible and usually expensive compared to traditional mortgage. You should consider all your options to accumulate cash before deciding on equity release loans.


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