Equity Release Schemes

View PDF | Print View
by: Hollie Wilcox
Total views: 21
Word Count: 386
Date: Wed, 15 Jul 2009 Time: 5:07 AM
0 comments

A number of equity release schemes exist that allow you to convert equity that you have in your home into cash that you can use to repay debts, make that special purchase you have been dreaming about, or to simply increase your standard of living. You can arrange to have the equity that you release paid all at once as a lump sum or you can receive it in part payments as a regular income over a period of time.

For those who do not fully understand what equity means, it is the asset value of your house after you have accounted for all loans and mortgages that are secured on it. If you purchased a house for £150,000 ten years ago with a £100,000 mortgage, and you have paid off £20,000 of your mortgage, and your house has risen in value by £60,000 then your current equity is £150,000 + £60,000 - £100,000 + £20,000 = £120,000.

There are a number of alternative equity release schemes that are available and which one you should choose will depend on your circumstances. These are known as Equity Release and Sell Rent Back.

An ordinary equity release scheme is organised typically through an insurance company that will either lend a sum of money that is secured on the home or will purchase the home in its entirety. However, the seller or mortgage is entitles to remain in the home for as long as they with No mortgage repayments are made during the lifetime of the seller but interest is rolled up. On the death of the seller, the seller's estate must pay the outstanding principal sum along with the compounded interest. Because of the effect of rolled up and compounded interest, the ultimate repayment may be several times greater than the amount borrowed, and so normally it is only possible to release around 30% of the equity this way.

In a sell rent back scheme the home is sold to an investor but the seller remains in the home as a tenant and pays an agreed rent. The tenancy agreement might be long term or short term. Due to the fact that a fair market rental will be paid on the home, it is usually possible to receive 75% of the equity using this scheme.

About the Author

If you would like more information about equity release then why not speak to the experts at www.swiftcapital.co.uk today!