Sales of share release plans have increased in recent years. In Scotland, figures from the Equity Release Council indicate that clients took an average lump sum of £ 39,834. Average figures for the UK across the UK are around £ 72,000 with the South East releasing an average of £ 84,000.
What is Equity Release?
Stock release schemes were first introduced in 1965 and have gone through a number of changes since then. It is a method of retaining your property while also earning a lump sum or steady stream of income from the property’s value.
Who can enjoy a share release plan?
If you are a homeowner in the UK and are 55 or older, you may be eligible to access money tied up in your home.
What are the different schemes?
There are two types of equity release: lifetime mortgages, in which you can borrow money against your home; and home reversal, where you sell a stake in your property.
Mortgages for life In a lifetime mortgage, you can borrow a portion of your property’s value and interest is charged on this amount. You usually pay nothing until you die or sell your home. Interest is compounded over the term of the loan.
Home reversal With a home reversal plan, you would normally sell a portion of your property to the vendor for less than market value. You have the right to live in the property for the rest of your life. When you move into care or pass away, the property is sold and the vendor receives the same share of the property that you paid for (for example, if you sold 40% to the vendor, they would receive 40% of the sale price).
Why has it become so popular?
Stock release has become popular in recent years for a combination of reasons. One of the key reasons people release income from their property is to supplement their lifestyle in retirement. Rising home prices have made homeownership a key part of many people’s retirement plans. For some, downsizing is optimal, however for those who want to stay in their home, equity release offers an alternative way to access the value of their home, while still being able to live in it.
Another reason stock release has become popular is due to changing attitudes. While at one time the property was expected to cascade through the family, today many younger generations do not have the same expectations, or would rather have their parents use the equity to enjoy their retirement, which is likely to last two or a half years. three decades. .
Why release the equity in your property?
There are many reasons why you can release your home equity. Some of the most popular reasons include financing home or garden improvements, financing a vacation, paying off debt or credit card loans.
What should you keep in mind?
Releasing the equity in your home is not a simple decision. It is a lifetime commitment and it is important that you fully understand the obligations and consequences before committing to a plan.
Seeking the advice of a trusted financial advisor on the stock release is an important step in making sure you are making the right decisions. A financial advisor will be able to assess your needs and circumstances and inform you whether or not you are eligible for the share release and whether or not it would be a sound financial decision.
