Best Equity Release Schemes
Home owners generally believe that their homes are dead assets. Some home owners, especially the senior citizens, feel that they are rich enough to own a valuable home, but too poor to have enough funds for their day-to-day expenses. Equity release schemes are now come very handy for such people to generate an income for their needs. They continue to be the owners of the homes and remain there for the rest of their lives. In effect, the equity release schemes of the United Kingdom and Australia are almost the same as the reverse mortgage in the United States.
Different equity release schemes
The equity release schemes can be divided into two main groups, namely, lifetime mortgage and home reversion scheme.
· Lifetime mortgage. Under the lifetime mortgage scheme the home is mortgaged against for the amount borrowed. The homeowner continues to own the home and live there until the death of the owner and spouse. The borrower has the options not to make any repayment, to repay at a later stage with interest or to pay partly, like interest alone. The borrowed amount can be obtained in lump sum or invested with an annuity scheme with the lender and get regular income. There is no restriction for the use of the funds received. It can be used for any purpose the borrower desires. The only condition is that all the prior liabilities on the property must be cleared. The funds obtained with lifetime mortgage can be used for this purpose. The borrower must continue to occupy the home until death or clearing the mortgage. The lender recovers his money by selling the property after the death of the borrower and spouse.
· Home reversion. Home reversion scheme of equity release is selling a part of the home to the scheme provider. The home owner pays a small rent for the part owned by the scheme provider. As in the case of the lifetime mortgage the home owner has to continue to live in the home. After the death of the owner and spouse the lender sells the property and takes his share. The rest is credited to the estate of the home owner. In case the owner vacates the home the property is sold and the proceeds apportioned according to the agreement. The home owner also has the option to sell the property and share the value with the lender.
Comparing equity release schemes
The terms of all lending companies for equity release may not be the same. Read carefully the terms including those in small prints. If you do not understand certain terms do not hesitate to ask and insist upon getting an answer in writing. Make sure that the scheme is flexible enough to serve your purpose. For example, when one of you and spouse dies your need for monthly income may be lower. Ensure that the liability is reduce to that extend so that your heirs may get more. Also check the interest rates.
In short, the equity release schemes are good for the older people. But take all the care to select the best scheme suitable for you.