Everyone, not just UK citizens and residents, dreams of owning their own home. But once you own your home, your investment is tied up in the property. What happens if you suddenly need an influx of surplus funds? Then you can opt for equity release. Here is an article to clarify the meaning and uses of equity release.
Definition of Equity Release
Equity release is simply the process of freeing up surplus funds which would have remained part of the dormant value of your property. You can initiate equity release and still live in the home involved in equity release.
Reasons to Pursue Equity Release
One common reason to initiate equity release is to allow retirees to enjoy their retirement more fully. They are able to do so by releasing money against the value of their home, and this money can be used to meet whatever needs they may have. There are retirees who suddenly find that their savings, investments and monthly pension are just not enough to cover higher expenses like medical bills and special care. A retiree or retirement-age couple may consider equity release then as a way to get additional funds without actually selling their property.
The monthly cash payments afforded by equity release are quite helpful for someone on a fixed-income or for someone who does not expect to leave a hefty inheritance to his beneficiaries. Even people who are not of retirement age may opt for equity release if they need surplus funds that badly, such as for the purchase of a new vehicle, for home improvements, or to pay for a wedding.Some people resort to equity release in order to significantly reduce the amount of inheritance tax they'll eventually have to pay. The funds produced from equity release might even be handed over by the property owner to his heirs so that they can use it towards the purchase of their own homes.
How does equity release work?
Basically, a person who pursues equity release from his home is actually getting a new loan based on the value of his property. The loan will come in the form of cash (generally given on a monthly basis). There are times when the lender will supply the surplus funds as a lump sum, but this is not advisable because you may find the value of your home to depreciate quickly as a result.
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