Are You Eligible For Equity-release Mortgage Schemes

Aug 30 at 7:07pm by Personal Finance Claims

Equity-release mortgage schemes may have become popular, but before you actually commit yourself to a similar plan, I would like to tell you that equity-release schemes are not meant for everyone. You may not be aware but the reality is that equity-release schemes are best only for those people who are in the age group of 60 +. For evidence, you just need to have a look at the list of applicants, which mainly comprises retired homeowners trying to find a suitable solution for their inadequate pension receipts and ever-rising personal debt. However, if you need funds urgently and are quite sure that a equity-release mortgage scheme will work for you, then you can go ahead and apply for a equity-release scheme. Here’s some more information on equity-release mortgage schemes, which will help you in your decision making process. 

Lending companies have their own unique plans and schemes, but if you look closely you will realise that most of these equity-release schemes can be broadly classified into two main categories, viz. lifetime mortgages and home-reversion schemes. In lifetime mortgages, you are not required to pay any amount to your lender as long as you are alive. This certainly provides a good reason to opt for such schemes, but you should not forget that there is also the flip side, i.e. interest can accumulate over time and exceed the equity of your home. To avoid this, I would recommend that you opt for lifetime mortgages that offer a no-negative equity guarantee. Such a scheme will ensure that your debts never exceed the actual market value of your home. 

In home-reversion schemes, you can sell whole or a share of your home to a home-reversion company for cash. The company will exercise its rights to sell this share only after your death. For example, if you sell 50 percentage share, the company will receive 50 percent from the sale proceeds of your home after your death. This is best for those who want to procure cash funds for existing needs and leave an inheritance for their heirs as well.

Lifetime mortgages have a larger market share than home-reversion schemes, but since you might have your own specific needs and requirements, you can opt for any one of the equity-release schemes described above. However, just don’t forget to read the fine print because that’s the only way you can select the most appropriate equity-release mortgage scheme.