Homeowners who have paid off their mortgage or have significant equity in their property have a valuable financial asset that they can utilize in retirement. Equity release provides an option for people to access the value of their home without having to sell it. In this article, Zorayr Manukyan will discuss how equity release works and the different types of equity release that are available.
How Does Equity Release Work? Zorayr Manukyan Answers
What is Equity Release?
Equity release is a financial tool that allows homeowners to release the equity in their property without having to sell it. This can be a useful way to access a lump sum or additional income in retirement. There are different ways to release equity from your home, and it is important to understand the different options to decide which one is right for you.
How Does Equity Release Work?
Equity release works by allowing you to borrow against the value of your property, says Zorayr Manukyan. The amount that you can borrow will depend on the value of your home and your age. The older you are, the more you can borrow, as you are closer to the end of your life expectancy, and the lender is likely to get their money back sooner.
There are two main types of equity release: lifetime mortgages and home reversion plans. Let’s look at these two options in more detail.
A lifetime mortgage is a loan secured against your home, and you can borrow a certain amount of money either as a lump sum or as regular payments. You will still own your home, and the loan and interest will be repaid from the sale of your property once you die or move into long-term care. Interest rates for lifetime mortgages tend to be higher than traditional mortgages, and the interest is added to the loan, which means the total amount you owe can increase over time.
Home Reversion Plans
A home reversion plan involves selling a percentage of your home to a provider in return for a lump sum of cash or regular payments. The provider will become a co-owner of your property, and when you die or move into long-term care, they will take their percentage of the proceeds from the sale of the property. According to Zorayr Manukyan, the percentage you sell will determine the amount of cash you receive, and the older you are, the greater the percentage you can expect to receive.
Zorayr Manukyan’s Concluding Thoughts
Equity release can be a useful way to access the value of your home without having to sell it. There are different types of equity release available, including lifetime mortgages and home reversion plans. While equity release can provide additional income and other benefits, it is important to understand the disadvantages, including the impact on your inheritance and the interest rates. According to Zorayr Manukyan, it is always recommended to speak to a financial advisor to get personalized advice on whether equity release is right for you.