Equity release is a financial plan that is designed to help an individual that is older than 55 years of age secure a loan against his home. This type of loan has of late become very popular because it helps old folks that have assets to use them to get a loan without having to move out. At the age of 55, it’s not possible to engage in gainful employment because employers prefer to hire people that are still young.
Even banks avoid lending money to senior citizen because they know there is no guarantee of recovering their money in case the debtor dies. The good thing about equity release is that you are not required to make any monthly payments. In fact, the equity release provider waits until you breathe your last or go to a permanent care facility to begin the process of recovering the money that you owe them. The facts outlined below will help you know more about qualifying for equity release.
- You must have Bought the Asset via Mortgage
For you to qualify for equity release, you are supposed to have bought your home through a mortgage loan. Besides that, you must have paid a considerable fraction of the debt. This means that a person that did not buy his property through mortgage may not qualify for this opportunity. Once you fulfill this requirement, you can then approach a reputable a provider such as Responsible Equity Release and ask to be granted a loan against your mortgage. The advantage of this financial package is that the equity release provider will not evict you from the house. In fact, you can continue staying in your home as much as you want. However, you are not allowed to sell the property because the equity release company will use it to recover the debt you owe them.
- You have to be 55 or More
Unfortunately, you can’t qualify for equity release when you are below 55 years. You must therefore wait until you hit the specified age to utilize the plan. If you are still young, you should consider taking a mortgage loan now so that you can use it later to gain access to funds that can sustain you after retirement. If you are applying for equity release as a couple, both of you must also be 55 or older. Incase your spouse is not yet 55, the loan request will still not be approved.
- The Condition of the House Matters
The amount of money that you can borrow is usually determined by the condition of your property. Homes that don’t need to be renovated are given the first priority because the equity release provider knows that such an asset will fetch more money when it’s sold in future in the property market. Before you get the money that you are asking for, the equity release company will fast asses your home to determine whether it’s more worthy than the figure that you are applying for. This decision is reached by doing the math on the balance in your mortgage loan and then deducting it from the current cost of such a property.
- Payment can be Made in Lump sum or Installments
When applying for equity release, you must specify how you want to be paid. You can be paid in Lump sum or in installments. Most senior homeowners prefer to be paid in installments because it’s easier for them to pay for the interest of the loan than when they get a huge amount of money. This option guarantees that you will live enough money that can be shared among your children after the debt has been cleared. A lump sum figure is interesting because you can use it to make a down payment for another property. The problem is that it’s not easy for your heirs to clear such a huge debt and in some cases, they might have to use their own money to offset the loan you leave behind after your demise.