Can Equity Release & a Mortgage Co-Exist?

More commonly, people inquiring about equity release have an existing mortgage or loan still secured on their home. However, for an equity release scheme to be accepted by the lender, the mortgage or secured loan balance must be fully repaid.

In order to ascertain whether the mortgage can be repaid by an equity release we need to know the valuation of the property & the age of the youngest property owner (minimum age is 55).

Once established, as long as the figure calculated is at least the size of the current mortgage, then the equity release can be applied for. Even in situations where the full mortgage balance cannot be effectively be reached by releasing equity, if the difference can be found by way of additional funds such as existing savings/investments, then the application can still proceed.

The major benefit of being in a position to pay off the mortgage is that no more monthly payments will be required in the future.

This will alleviate any financial pressures of maintaining the mortgage payments maybe at a time of redundancy, retirement through ill-health or severe debt issues.

Potentially, this course of action would avoid the issues of repossession & even incurring an adverse credit record.

Nevertheless, it must be bourne in mind the consequences of this course of action.

Yes there are no more monthly payments, however the interest that would normally have been repaid is instead added to the mortgage balance. This has the effect of an ever increasing debt that effectively doubles every 10-11 years, dependent on the interest rate obtained.

There may be concern that this equation would, & can, have the effect of eroding the value of ones estate, especially given the fall in property prices recently.

However, the optimists amongst us would assume that over the longer term property values will recover & escalate over time.

Effectively this would counter the roll-up effect of the increasing equity release balance. Unfortunately, we would not know the full extent of this & hence the reason for the inclusion of the no negative equity guarantees built into these SHIP regulated schemes.

This ensures that any beneficiaries cannot be saddled with any personal debt, with the worse case scenario effectively being that the lender takes the value of the property; no more.

For these reasons from a lifetime mortgage lenders point of view, they do not permit any second charge as there maybe no security left for the subsequent lender in case of default.

Why a second charge would want to be placed given there maybe no future equity remaining anyway would be a questionable issue.

Therefore in summary, anyone looking at taking out equity release must be able to redeem any existing mortgage with the new lifetime mortgage being the only secured loan on the property.

Release Home Equity to Make Your Retired Life Secured

Various types of financial plans and schemes come up every day that can take care of our old age, particularly in the post-retirement phase. After retirement, many constraints come up especially in the financial areas. With a meager pension, it becomes really difficult to meet all the requirements of life. You can release home equity to have a secured and tension-free retirement life. For this, you can look for equity release companies that will eagerly help you to understand the concept, the advantages and the benefits of releasing equity against your property. When compared with other plans and schemes for retirement, to release home equity seems the best option.

When you release home equity, you actually give out your property or a part of your property to the lender against a sum of money. There is an option given to you in terms of taking the money too. The equity release companies have to be informed about the mode of payment you want to opt for. You can either take the total value of the equity release at one time, which will give you lump sum money. If you do not want that and wish to have money paid in installments, you can choose that also. You will get the payment in monthly installments. This will not only save your money but also improve your monthly budget. And most importantly, you do not need to leave you residence after you release home equity. You can stay in the house till your death.

If you want to release home equity, you have to meet some deadlines and satisfy some clauses. It is only then that equity release companies can assist you in releasing equity from your property. The person who wants to release home equity should be 55 years or more of age. Secondly, he/she should be the owner of the primary residence that will be released for equity. The house should be in good condition and should have a decent valuation. Last but most importantly you can only release home equity if you do not have any outstanding mortgage particularly against your property. Fulfilling these criteria successfully will let you release home equity and have a peaceful retired life.

Release home equity comes with many advantages and benefits. Apart from financial security that is provides, the amount that you receive after releasing equity from your home is deferred from taxation. This is a great benefit for the senior citizens for the country. Tax is not levied either on lump sum payment or on monthly installments. However, if you invest the money in some other plan or scheme, then it might become taxable as per the tax rules in the country. Apart from this, there is no obligation on your part to repay the amount till your death. This provides a great sense of relief post-retirement. You can also invest in some health schemes that might provide you support in your old age. Professionals from various equity release companies can help you in deciding such things.