Equity Release

Each person locks up his or her lifetime earnings in real estate property investments and a huge chunk of it goes into building our own houses! Yet it is so true that this huge investment remains unutilized by us during our lifetime. Unlocking this hidden treasure of their own with the help of equity release has helped them to explore new possibilities in their life.

Drawdown equity release:

A subset of lifetime mortgages, the drawdown mortgages are one of the most popular forms of equity release. Working on the theory of compounded interest, the lender releases a sum of money based on the value of your home and the interest borne on such loan is only added up to the original value of the loan. You can receive a small part of the total loan initially and then keep drawing out as and when necessary. The entire loan plus compounded interest is repaid when the house is sold off finally. Such equity release takes into account the natural house price inflation.

Benefits of using drawdown equity release:

       Such kind of equity release plans is most suitable for those who do not want the entire lump sum loan amount in one go. You can borrow money as and when you like as per your requirements and you need to pay interest only for the amount you actually withdraw.

       Another benefit of this plan is that you have to pay interest only for the time you have actually availed the loan. Hence this kind of mortgage is quite useful towards the dusk years of your life.

       There is no negative equity guarantee attached to drawdown equity mortgage which means that even if the loan amount exceeded the total value of your house property, yet you would have the right to continue living in that house.

       There is heavy competition in the market for such kind of equity release and hence you can bargain interest rates as well as the terms before availing them.

       Unlike home reversion mortgage, you can avail this scheme even if you are as young as 55.

       You get total flexibility with this scheme since it allows you to move home if you wish at a later date.

       The added benefit is that such a product is being regulated and monitored by the Financial Service Authority as well.

Drawdown plans that commonly used with equity release schemes:

You can choose different flavors of drawdown plans that come with such equity release schemes but the essential part of all such plans is that they provide you with a previously agreed upon loan amount sanctioned depending upon the value of the property and the age of the youngest applicant. The options that you can avail under the Drawdown plans include early repayment penalties, equity protection clause, increasing cash reserve, and interest calculation methods. No matter what the variations maybe in these clauses, usually the lenders would require you to take up a minimum loan of £20,000 for a minimum period of 10 years.