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Equity Release Schemes Explained

    Post War Baby Boomers can now give themselves a complete new lease of life by an equity release scheme. These recently retired house owners are sometimes house rich however cash poor resulting from lack of good pensions and the ever rising cost of living.

    Equity Release Defined

    Equity launch is the commonest name used for schemes that release money locked up in a retired residence owner’s property. The time period ‘Equity’ means the amount of cash worth that might be realized on the sale of a property. Cash strapped retired house owners are often house rich but cash poor throughout various stages of retirement. Hovering living costs that out strip inadequate pension provision is the principle factor that impacts the quality of life and even the fundamental essentials, for what needs to be retirement golden years for a lot of put up war baby boomers. When children develop up and leave dwelling, some retired home owners with large properties are able to trade down to a smaller lower worth property and release the cash (equity) in their larger house. However trading down will not be an option for many, as their present property might not be massive enough. Perhaps they simply don’t want to move for many reasons corresponding to emotional attachments, close proximity of relations and mates etc. So what are the alternate options to trading down? With the exception to selling your own home and renting another property, there are two different ways to release the money locked up in your house.

    Completely different Types of Equity Release Schemes

    Broadly speaking, these two different types of equity launch schemes are often known as a Lifetime Mortgage and ‘Home Reversion’. Basically a life time mortgage as the name implies, is a mortgage for life. There are a lot of variations on this theme with fixed rates for all times, interest rolled up and draw down schemes, to name however a few. The primary characteristic of the lifetime mortgage is that ownership of the property is retained collectively with the benefits of increased property values. When the house is sold, the lender is repaid and the balance is retained by the house owner or their estate. The opposite type of equity launch scheme is known as Home Reversion. Essentially this is a way of selling your property at a reduced value for the lifetime right to live virtually lease free. The time period ‘Reversion’ may appertain to the truth that the property finally reverts to the investor that provided funds to the home owner. The benefit of this scheme is that more cash can usually be launched via a reversion plan than a Lifetime mortgage, notably for older dwelling owners. Again there are various variations on the theme, similar to an element reversion, whereby only a portion of the property is used to provide funds.

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