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Equity Release Explained. What is Equity Release and what are the pro's and con's of Equity Release?

Equity Release

Equity release is a means of freeing up capital against one’s own home whilst maintaining the use of the property. The term “equity” refers, quite simply, to the value of a property on the open market less any debts that are held against it.

The principle of equity release is fairly simple. When there is little or no mortgage still to pay but you are in need of funds, you sell some of the equity on your home in exchange for hard cash. Then when you no longer reside at the property, either due to death or if you should move out or into a care home, the money that was made available through equity release is repaid.

The benefits of such an arrangement are pretty much self-explanatory. It has the potential to release a very substantial sum of money almost immediately without triggering a prohibitive schedule of regular repayments. One the capital has been made available you are free to enjoy it; to use it in any way you see fit. Suddenly you are no longer struggling to make ends meet, but rather you are considering that Caribbean cruise that you’ve long wanted to do, or maybe early retirement.

There are other advantages with equity release too. Because there is a no negative equity guarantee the borrower is protected against a downturn in the market. And if interest rates should fall borrowers are perfectly free to refinance their mortgage with another provider at a reduced cost.

Of course every action has a reaction, and nobody lends you money that will not have to be paid back, with interest, at some later stage.

So it is with equity release, and the down side of making such a commitment is that when you pass away you will have less to leave to your family, especially so when the value of the property has increased at a slower rate than the interest on your mortgage.

Equity release is, by definition, considerably more expensive than it would have been to sell the property to make the equity available. Thus it is the better option only when the desire is to remain in the property, and not as a consequence of any financial comparative.

When considering releasing equity as a means of freeing up some extra cash it is always helpful to contact an expert who has no selfish interest in whatever decision you choose to take. It should be considered alongside all the alternatives, and the pros and cons weighed up, before any final commitment is made. To begin the process of looking into equity release options, visit the above equity release websites and comparison providers so you can speak with a professional equity release advisor who may be able to assist you further with your equity release plans.

 
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