Getting a nice lump some of capital, or steady income of a period of time, is possible through equity releases. While mostly for the elderly or ill, these types of loans are given most commonly in exchange for rights to a piece of property or home. It isn't without its drawbacks, however, and isn't a decision that is to be made lightly.
The way an equity release works is by promising a property to a lender, in exchange for a lump sum of money or periodical payments. The good news here is that the borrower is able to live on the property, and in some cases retain full rights to the property, until death. Method of payment is usually up to the lender, who may put the value of the home in interest-bearing accounts or even allow an advance in exchange for ownership rights in the future.
The benefits that an equity release offers for descendants is also vast. First, the descendants will be able to enjoy a lesser inheritance tax to pay. Inheritance tax is based on the total value of the inheritance, and without an expensive property to value the tax is much easier to pay. Any leftover money not spent from the sum obtained by the borrower is also made available to descendants in most cases.
Things aren't always on the plus side with an equity release, however. Descendants and relatives who succeed the applicant will inherit less capital or assets as a result. In the same sense, any charities that were to receive money according to a legal will also suffers the same fate. This makes the debate of whether or not to opt for an equity release quite tough, and one which should be discussed with family members before making a decision.
There are several different flavors of equity releases to keep in mind. The lifetime mortgage, for instance, is one of the most common. It allows for a loan to be secured against the borrower's home, which is then repaid upon death as the lender resells the property to recover lost capital. This method also allows for borrowers to keep the house ownership until death.
Other flavors of equity releases may include the home reversion, in which up to 100% of the property is sold to a third party. In this case, the borrower can still live in the home but has sold rights to another person or business. In return, the borrower receives regular income or a large lump sum in compensation for the exchange in ownership rights.
Closing Comments
Obtaining an equity release is a relatively painless process- most of the work is in deciding on the options and how to handle finances upon death. If you think an equity release may be right for you, consider going to a local lender or go online to seek out the best offer for your situation. - 20896
The way an equity release works is by promising a property to a lender, in exchange for a lump sum of money or periodical payments. The good news here is that the borrower is able to live on the property, and in some cases retain full rights to the property, until death. Method of payment is usually up to the lender, who may put the value of the home in interest-bearing accounts or even allow an advance in exchange for ownership rights in the future.
The benefits that an equity release offers for descendants is also vast. First, the descendants will be able to enjoy a lesser inheritance tax to pay. Inheritance tax is based on the total value of the inheritance, and without an expensive property to value the tax is much easier to pay. Any leftover money not spent from the sum obtained by the borrower is also made available to descendants in most cases.
Things aren't always on the plus side with an equity release, however. Descendants and relatives who succeed the applicant will inherit less capital or assets as a result. In the same sense, any charities that were to receive money according to a legal will also suffers the same fate. This makes the debate of whether or not to opt for an equity release quite tough, and one which should be discussed with family members before making a decision.
There are several different flavors of equity releases to keep in mind. The lifetime mortgage, for instance, is one of the most common. It allows for a loan to be secured against the borrower's home, which is then repaid upon death as the lender resells the property to recover lost capital. This method also allows for borrowers to keep the house ownership until death.
Other flavors of equity releases may include the home reversion, in which up to 100% of the property is sold to a third party. In this case, the borrower can still live in the home but has sold rights to another person or business. In return, the borrower receives regular income or a large lump sum in compensation for the exchange in ownership rights.
Closing Comments
Obtaining an equity release is a relatively painless process- most of the work is in deciding on the options and how to handle finances upon death. If you think an equity release may be right for you, consider going to a local lender or go online to seek out the best offer for your situation. - 20896
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