How to get money from your home
Traditionally, you have three ways in which you can make money from your home: selling it, and moving somewhere else; renting it out, and moving as well; and renting out a room or portion of your property, and living with a stranger.
Equity release deals are very popular today as a very convenient option for elder people to access money for a number of purposes. It is a very interesting alternative to the usual method of selling property and downsizing, and for many good reasons. In essence, an equity release deal allows elderly people to get money from their properties while at the same time still live in those propertis for the rest of their lives or until they move to long term care.
This isn’t minor, since many people over 55 years old live in a home that has a deep meaning to them. They are often family homes with years and years of memories and good times lived there, and many wouldn’t like to move just because the need more money, or they could use some to live a more fullfilling and dignified retirement.
With an equity release scheme, you can benefit from the value of your home in the form of money while at the same time enjoy living in your beloved place for as long as you want. This has made equity release deals, also known as reverse mortgages, very attractive to a large sector of the population.
How to access an equity release deal
If you are interested in the benefits an equity release deals has to offer, you must first of all do some research and find out how it actually works and which options you have. Under the name of “equity release deals” you have a range of financial services and some will be more convenient than others depending on your particular situation and your interest. Once you have an idea on what your options are, it is reccommendable that you get a professional advisor to show you the best things you can do and explain why.
This is because the elderly population are sometimes targeted by inescrupulous lenders because they are seen as vulnerable people. There are some good lenders out there, but you aren’t likely to tell them apart without trained help.
Also, and advisor should tell you about your rights, like The Three-Day Cancellation Rule or the No Negative Equity Guarantee. These are terms that sometimes should apply to all deals, so you should request they are respected, otherwise drop from the deal immediately. The first rule fits into that category. The second one isn’t mandatory, but utterly convenient, so if you are between two or more lenders, you can consider discarding those that don’t offer this guarantee.
Your advisor should also help you understand how these deals affect your capital gains, whether or not they are deductible, and if deals you are offered with can serve as Cash-Out Refinance Home Loans to help you out of previous debt.
How much can you get from an equity release deal?
The first thing you have to know is that you will never get from an equity release deal as much equity as you have from your home. So the questions “how much equity does my house have?” and “how much can I get?” have different answers. The only way to get full equity from your home is to sell it at the market value with no standing debt from mortgages or any other loan of the like.
Equity of a home is calculated by finding out the market value and substracting all standing debt on it. Equity release deals should help you get your hands on part of that value, in cash or some sort of fund you can access. You can also opt to release only part of the equity, thus retaining a portion of the ownership of your home. Some deals even offer you to take as much as you want as time goes by, so you can keep some control on what portion of your home you actually give up in the end.
How much equity you can release will depend on a number of factors, not only the value of your home. The older you are, for example, the more you are likely to get. Also, interest rates play a big part in how much of that equity actually gets to your hands. More convenient interest rates and a drowdown scheme will help you keep your debt under control, white lump sums are a good option if you want to get as much as possible.