What is equity release? Equity release is essentially a way of keeping hold of certain property or other item that has monetary value, with the value of this property remaining unchanged, while receiving a regular flow or a fixed amount of money each month. This could either be a fixed amount of money per month, or it could be a lump sum, periodically given out to the owner, or it could be in the form of stock options, or royalty payments, or even other types of money from various assets. The owner keeps the ownership and control of the asset, but does not receive monetary value in return. In this sense, the equity release can be considered as a loan against an asset. It would be viewed as a second mortgage, or an investment-like activity, where the equity release acts as a lien against the particular asset.
This is very common for first time home buyers and young people aged 55 and up. In fact, young people aged 55 and up are statistically more likely to have some form of equity release mortgage loan. Why is this so? If you are a young person who purchased your first home at a time when interest rates were relatively low, it is likely that your down payment was quite small. Also, since the purchase of your new house was done with a mortgage, chances are that your credit score was good. Therefore, you had great credit and it is quite possible that you received a mortgage with a very affordable rate.
All of these things mean that the money that you are currently paying on your home (which is probably a substantial amount) is not making you any type of profit. With an equity release mortgage loan, you can actually take some of that money and pay back the lender some of what you owe. Now, many people have questions about this. For instance, what is the benefit of the lender coming in and asking me to pay back a percentage of what I owe them?
The answer to this question is rather obvious. First, this is a perfect opportunity for you to get out from under all of your long-term debt obligations and possibly even have some left over. In addition, if you release enough of your inheritance to pay back your lender, you will be increasing your inheritance and reducing the tax position of your family.
There are a number of financial advisers that will tell you that if you have an asset that is left over after you pay back a large part of what you owe the lender, you can actually use that asset as collateral for future loans. It is not a good idea to take this approach; however, there are some cases where the situation may work out well. Before you decide that this is something that you should do, you need to consult with a financial adviser who can help you understand the details. Some people are just better off allowing the equity release products to work out in their favor. Your adviser can explain the details of these plans and what you could expect.
What is equity release? It is the process of selling your home and then immediately using any remaining money to pay back your lender and release any remaining capital. However, many experts recommend that you release only a portion of what you owe the lender before selling your home. If your lender is willing to work with you, then this could be a great way for you to get out from underneath your mortgage and possibly even get a better tax return.