Your home’s equity is generally regarded as the value of your home or the wealth locked in your home. Usually you have to sell your home to get access to its equity. Well, equity is slightly more complicated than that. Your home’s equity is the difference between the fair market value of your home and the amount of money you owe on your home. That money owed is in the form of a mortgage, charges against the home, and any other outstanding payments.
So if your home is worth £200,000 at fair market value and you owe £50,000 in mortgage and fees, you have £150,000 of equity. Accessing that equity is called equity release. If you need more money than you are getting at the moment, especially if you are on a fixed income, you should consider releasing some through a qualified broker.
You could be on a fixed income for many different reasons. Those over 55 are most likely to be on fixed or low incomes. They could be on fixed incomes because they are living on retirement money or retirement benefits. Many people over 55 are also locked into the last decade or so of a career. If your pay has not kept up with your expenses, you could be underwater on your bills. Recognising the unique struggles of those over 55, the UK government has created tax-free ways to release some equity from your home. You need a professional to help you determine which equity release scheme is right for you.
Understanding the particulars of your situation and the limits of the law is the work of professional financial planners. Mortgages and fair market value is notoriously difficult to understand. Furthermore, it is very difficult to navigate mortgage and finance laws. If you don’t understand all of the different types of release schemes, you need to hire a professional to help you navigate it.
Many people are out there seeking to capitalise on seniors who need extra money. There are also many people who are spreading myths about equity release that just aren’t true.
Myths about Release
The most common myths are that you will no longer be the owner of your home and that you won’t have anything to leave to those who inherit from you. Such myths are simply not true. When done properly, an equity release will not transfer ownership of your home. The market value of your home is yours by right. You bought the home, you own the home, and therefore the home’s worth is yours as well. Furthermore, you will still own the home and be able to pass it down to those who inherit from you.
The amount of money owed on the home will change if you employ an equity release, but it will not transfer ownership of the home to the bank or anyone else. Such a situation is if you do it through a talented broker who can help you. You need to make sure you shop around for the best options.