What are Equity Release Mortgages?

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by: KatieChristanthamum
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If you own a house and have been lucky enough to clear all or most of the mortgage then you can consider yourself very fortunate. There are many people who manage to clear their mortgage during the latter stages of their life and are normally living in properties that hold a significant amount of equity. There may be times when a homeowner with a low or no mortgage may want to release some equity from their property and turn it into cash. Equity release is one of those ways in which people who have a lot of equity in their house can convert the equity into cash.

There are different types of equity release schemes that are supplied in the UK. Two of the main types of equity release schemes are either lifetime mortgages, or reversion schemes. Let us have a closer look at the 2 options available for homeowners:

Lifetime Mortgages - With a lifetime mortgage, the home owner is given a lump sum of cash or has the choice to be paid a monthly income. The homeowner does not pay any interest at the outset. The interest is actually rolled up and compounded during the duration of the loan, until the property is sold. The proceeds from the sale of the property are used to repay the interest.

Reversion Scheme - In a reversion scheme the homeowner sells their property to a Reversion company. The seller (and any partner) has the right to stay in the property until death. After that period, the property can be sold. The seller can be paid a lump sum or can be paid on a monthly basis. The amount of money that is paid to the seller depends upon the age of the seller. The higher the age of the seller, the higher will be the offer. But in general, the price can range from anything between 20% and 60%.

The above two equity release schemes are the most popular options that are exercised by house owners. It is important for all homeowners to conduct careful and detailed research to ensure that they choose the most option for their circumstances. Making the wrong choice of scheme can end up being very costly, so thorough research is essential for any home seller. Make sure you seek the advice of a professional and experienced financial adviser to ensure that you end up with the best deal.

About the Author

To learn more about equity release schemes and products, check the commercial loans visit the respective links. Article Spinner by Article Marketing Robot

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