No Monthly Mortgage Payments
An equity release scheme is a loan that is secured against your property that will be repaid when you die. These types of loans are good if you want to borrow money against your property but don’t want monthly mortgage payments. The way it works is that a company will lend you percentage of your homes value.
Equity Release Funding Your Retirement
Most companies that operate these schemes will only lend to people of retirement age. The older you the more you will be able to borrow. For example an eighty year old homeowner will be able to borrow a higher percentage of their home as the compared to a 65 year old.
The way that these schemes operate is that you will receive a loan secured against your home that will be repaid upon your death. Generally speaking the mortgagor will get the whole proceeds of the sale even though they only lent you a small percentage of it’s value.
These schemes should be carefully considered as they are an expensive way of funding your lifestyle in the long term. The attraction is that there are no monthly payments but you will only receive perhaps 40% of your properties value as a lump sum. It is a good idea to discuss these types of schemes with your financial advisor and your family before entering into any agreements.