Can Equity Release Solve My Debt Problems?

Can Equity Release Solve My Debt Problems?

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To understand equity release we need to understand what is meant by equity. The equity you have in your home can be defined as the value of your home on the open market less any outstanding mortgage or other debt secured against it. In other words if you sold the property, paid off your secured debts, what would you be left with. In an equity release plan you are in effect doing this, for all or part of your home, without the need to move house. You can use the money raised as you wish and, because the equity in your property is already yours you will not be taxed on it.

All equity release schemes have entry criteria. Most obviously you must own the property, there is always an age requirement, most often 55 and a commitment to maintain the property to a standard. The scheme will either provide a lump sum or a form of regular income, or a balance between the two. As repayment is not normally made until the property is sold after the death of the borrower only a limited percentage of the equity will ever be advanced.

Equity release schemes come in one of two basic forms; firstly a home revision, secondly a lifetime mortgage;

When a borrower takes out a lifetime mortgage, a commitment is made to repay the lender from the sale of the property usually after the death of the borrower, or sooner in certain circumstances. The mortgage is registered as a charge against the property as with any mortgage.

With a home reversion equity release plan the owner sells all or part of their home. Ownership will transfer in full or part to the reversion company with the owner continuing to live there as a tenant of the company. A lease will define the conditions and term of the tenancy and normally the home is sold either when the tenant dies or moves out of the property.

The world of equity release has seen substantial growth in the past few years with many organisations now offering their services in this sector. Whilst equity release can seem an ideal solution it is not suitable for everyone. Understanding exactly what is involved is vital if this is something that you are seriously considering.

Equity release schemes can be a helpful way of resolving debt or raising capital, but if you simply need to raise cash you may wish to consider alternatives such as selling your current home and buying a smaller property, this way you would keep full ownership of your new home and avoid having to pay interest on a loan. Also you may think about tracing and realising any private pensions that you may have, checking with local authorities and governmental agencies if you are entitled to any benefits that you are not currently receiving, or simply selling any investments.

The rule of thumb with all of the options above is to take sound and independent advice before committing to anything.

When considering equity release schemes most people are thinking in terms of a cash lump sum. However many schemes have as an option the ability to take some or all of the advance as regular income rather than upfront cash. Other schemes provide for the possibility of having a drawdown facility within specified limits. What dictates the most suitable approach will be the circumstances of the individual and their objectives for the exercise.

If equity release is not an option or not suitable and debt was the motivation behind considering it, then more standard approaches such as debt management plans or IVAs (Trust Deeds in Scotland) might be a better option.

About the Author:
In order to find out if there is a plan out there for you, call us free on 0800 083 4646 or visit equity release. You will have the option to leave your personal details and we will then call you back at a time that suits you.
If you want more general debt help please call us on 0800 083 4646 or visit



Article Originally Published On: http://www.articlesnatch.com


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