Smart Ways to Release Equity
Many people have equity in their home that they don’t need. They could sell it, but then they would have to find a new place to live. If you are someone who wants to simplify your life and use the money from your house sale for something other than buying another property, then there is an option for you: equity release mortgages. Equity release mortgages allow homeowners to borrow against the value of their property without having to give up ownership of it or move out of it.
First, there are three major types of equity release mortgages: home reversion plans, lifetime mortgage plans, and property-purchase schemes.
Home reversion plan – This type of equity release is designed to be a loan that will eventually need to be repaid by the homeowner’s estate after death. If you’re not sure how this works or if it might fit your needs, ask your financial advisor for help making sense out of what could seem like an overwhelming concept.
Lifetime mortgage plan – The main benefit here is that homeowners won’t have any more payments when they die because there isn’t a repayment schedule on these loans. However, their heirs may face inheritance taxes depending on their state’s laws so keep in mind those potential consequences as well.
Property-purchase scheme – These mortgages are designed to allow homeowners to buy a property without putting any of their own money down, and while there is no repayment schedule with these loans, they will be subject to an inheritance tax upon death if the homeowner doesn’t provide beneficiaries who agree not to pass on liability for this loan.