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Equity Release Schemes

Many homeowners release cash from their property that they have built up over time, these are called equity release schemes.  The equity can be calculated as the difference of the value of the property itself and the amount outstanding on the mortgage.

Once you have decided that you would like to partake in one of the equity release schemes, you need to do your research to find out which one is most suited to you.  You can either receive a lump sum, a drawdown facility or you have the option to receive a steady cash flow over a period of time.  Depending on the reason to release the equity of your property will decide which method you take.

The main two types of equity release schemes in today’s world are a home reversion scheme or a lifetime mortgage.

A home reversion scheme involves the homeowner selling a proportion of the property to the scheme provider, the owner will receive a lump sum of money and pay a small amount of rent to the service provider.  When the property is sold the scheme provider will take their share of that property and pay the homeowner in another lump sum.

A lifetime mortgage on the other hand is where a mortgage is secured against the property after all other finances of the property have been resolved.  This is the type of mortgage where the homeowner will get the choice of receiving a lump sum or a constant cash flow over time.

The most attractive feature about this type of equity release scheme is the fact that no interest is to be paid throughout the lifetime of the mortgage, instead the interest will accumulate onto the final balance which is redeemed after the property has been sold or the homeowner has been moved into long term car.

Research has shown that over the next few years the home equity release market will grow by significant amount.  This is because people are beginning to worry about whether they have saved enough money for when it comes to their retirement, they see that any property they own as an investment towards the funds that will be required.

Before you make any decisions you would be advised to speak to a financial advisor to make sure that you are making the right decision.  There are other methods of getting an instant cash amount opposed to using one of the home equity release schemes available on the market.

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