Equity Release Schemes

There are very few people that can say they are living very comfortably in their retirement these days. The economic times have hit pensioners in the UK very hard. What is supposed to be a wonderful time in our lives has become a burden for many. If they are unable to return to the workforce, what options are there for a couple or widows and widowers?; The answer could be to get an Equity Release Scheme. They are available to people over a certain age, usually retirement age. There are many questions that people have about an Equity Release, so this article will give you some basic information on how they work.

You may hear these Equity Release Schemes called other names. So that you can be aware of them this is a list: Lifetime mortgages, Home reversion and Home income plans. If your lending institution does this type of plan it could have one of these names.

What this type of mortgage does is give you money on a monthly basis. The bank pays you for living in your home. Does it sound too good to be true? Well it is true, but it does have a few caveats. If you move to a nursing home or pass away the Equity Release Scheme must be repaid. Your heirs will be responsible for selling the home after your death and paying the bank. Should your heirs decide to keep the home for themselves they still have to pay the bank back the money for the Equity Release Scheme.

Your heirs cannot keep the home and rent it out for a source of income. This is one of the drawbacks of this type of mortgage. If the home can’t be sold and no one can rent it, it may revert to the bank. The bank doesn’t necessarily want the home, but that is the structure of the Equity Release Scheme.

A positive side to an Equity Release Scheme is that you can stay in your home. The money you get from the bank monthly can take care of your expenses. If you need to make any home repairs you wouldn’t have to try to find extra money from your retirement earnings to accomplish it. Staying independent means a lot as we age, and the Equity Release Scheme means that many older Britons could stay in their home.

Some banks offer their customers a lump sum payment instead of monthly payments. The amount you can ultimately receive is based on the value of your property. You need to own the property, meaning there is no existing mortgage.It is possible with some lending institutions to still have a very small amount left on your mortgage to get an Equity Release Scheme. Some of the money from it would have to pay off the mortgage though.

Now that you are aware of how the Equity Release Scheme is structured you can decide if it is something that will work in your situation.