Considerations of Equity Release
You are not alone if you are asking the question “Should I get equity release?” Equity release is a type of loan which allows you to borrow money against your property. However, before deciding on getting equity release for your home, it is important that you understand what this process involves and how it could affect your finances in the future. See here some of the most frequently asked questions about equity release. You can make an informed decision about whether or not this option might be right for your situation.
How much does it cost? The amount you borrow is calculated as a percentage of your property’s value and will be repaid over an extended period. This means that the more expensive your home, the higher the repayments could be in later years – which may become unaffordable if interest rates increase or house prices fall.
What are some other ways to release equity? There are three main types of equity release: lifetime mortgage, annuity plan and reverse-mortgage with debt consolidation. A lifetime mortgage allows you to take out a loan on your property without having to pay any money back whilst living there so long as you live for at least 25 years after taking this type of loan; however it requires that all proceeds from selling your home go to the lender. An annuity plan is a monthly repayment loan which you can pay off in one lump sum when your property has increased in value and sell it without having to repay any of the money owed; however, this type of equity release does not allow for interest rates rises so if these happen you will be more vulnerable than other types of loans. The third option- reverse mortgage with debt consolidation – allows you to borrow funds against your property whilst still living there and paying back an initial lump sum at the end of 25 years or upon death before inheriting your estate.