What is Equity Release?

Equity release is a way of gaining a regular flow of money, with the difference of the home’s value and the amount you owe on it as collateral. The equity that you release can be used to pay off debts such as credit card debt and personal loans, or it can be used to build up additional wealth that can be used for investments, or even for paying off home mortgage payments or other outstanding debt obligations.

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Equity release can be done through a number of ways including, selling your home, borrowing against the equity release, or through a long-term care plan such as a special needs trust fund. Most equity release policies will have a cap on the amount that can be borrowed or released. If the amount that can be borrowed is more than the current market value of your home then your home reversion plan will not result in any cash out and will only provide a return on the portion of your loan that exceeds the current market value. For help with all conveyancing matters, consider a Conveyancing Solicitors Cheltenham like Dee and Griffin

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One type of equity release scheme that is becoming popular among borrowers who are concerned about their long-term financial stability is the Cash Value Release (CVR) program. A typical CVR policy will pay you a lump sum if you are unable to earn an income because of injury or illness. You would use the lump sum as collateral on a future long-term care insurance policy. The insurance company would agree to pay you a percentage of the current market value for the lifetime mortgage balance owed on the home, less the amount that you still owe on the home.

 

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