Equity Release Markets and Industry
The equity release market started in the UK in 1965. It is a great help for those who owned valuable homes but did not have enough money to spend on day to day expenses. The scheme is to obtain money in lump sum or as a periodical steady income from the lender. The loan is secured by the home owned by the borrower. Under the equity release scheme there are two options to repay the debt. One is while the borrower is alive the money along with interest can be repaid at a later date. A second way is for the lender to sell the property after the death of the borrower and spouse and recover the dues with interest.
The terms of equity release in the UK, the United States and Australia are slightly different from each other. The terms of each country is described below briefly.
The United Kingdom
There are mainly two types of equity release schemes in the UK. They are the life time mortgages and home reversion plan.
· In the lifetime mortgages you get a tax free loan with no obligation to repay. The loan can be a lump sum or a fixed monthly income. Until the death of the borrower and the spouse you remain the owner of the property. If the heirs of the borrower do not repay the loan with interest the property is sold by the lender.
· Under the home reversion plan you sell a part of your property to the lender. That ensures a tax free lump sum payment to the owner. The home remains in the custody of the owner until the death of the owner and spouse. After their death the lender sells the property and proceeds are apportioned according to the agreement. The owner’s share goes to his/her estate.
The United States
· In the United States the equity release scheme is known as ‘reverse mortgage’. Reverse mortgage can be availed by home owning senior citizens of 62 years of age or more. There is no obligation for repayment on the part of the owner or spouse if they live in the mortgaged property until their death. The lender recovers his money and interest after their death by selling the property.
· The money taken out on reverse mortgage can be used for any purpose. But all prior mortgages must be paid off immediate on receipt of the reverse mortgage money.
· If the owner of the home or spouse sells the property or moves out of the home the debt becomes liable to be paid immediately.
Australia
· To qualify for equity release schemes in Australia one must be over 63 years of age. As in the case of the UK and the US the money can be obtained in lump sum, monthly regular income or a combination of both. The borrower has the option to pay part of the debt or not to do so.
· If a No Negative Equity Guarantee is obtained from the lender, the borrower or heirs have no liability to pay if the borrowed amount along with interest goes beyond the market value of the property.
In all these counties more and more senior citizens are availing of the equity release facility and lead a comfortable life in their old age.