Home Equity Release Programs Explained

Home Equity Release Programs Explained

In the US prices have risen dramatically as compared to incomes coming into each household.  This means that many families have a high level of wealth but low incomes.  This is when equity comes into play.  Equity release schemes in the past have received a lot of bad publicity, primarily due to how expensive they are and in some cases, consumers were only getting a fraction of what their homes were truly worth through these particular schemes.

There are two types of home equity release schemes:

Home reversions

Home reversion schemes are where you sell part of your home to a home reversion company.  In return for your sell you receive a lump sum payment or a life policy.  Legal ownership of your home is then transferred to the home reversion company with the part of your home which was not sold going into a trust account.  When you die, the home reversion company will sell your home while gaining one hundred percent of the profits.

Lifetime mortgages
These types of home equity release schemes are very popular because you can borrow a set amount of money against your home equity.  The cash you free up from your home equity is received in lump sum or as a plan which allows you to take it out when you need it.

There are numerous benefits to home equity release schemes
The main benefits of both these home equity release schemes is that you can get the right amount of equity for your needs while maintaining the flexibility of releasing any further equity in your home.  You can leave a fixed portion of equity to your heirs.

Drawback for home equity release schemes
There are some drawbacks to both these home equity release schemes.  Sometimes the equity release rates can prove high and you are transferring legal ownership of your home to another a company.  Your tax situation will be affected more times to none.  Before you jump into a retirement equity release program, make sure you speak to a financial advisor who can give you expert advice on home equity release schemes.

Summary
You have worked hard for your home and assets.  You want to utilize your equity in your home for dire emergencies.  I would not recommend utilizing a home equity release scheme just for extra money.  You want your heirs to enjoy what you have left them upon their death as compared to a mountain of debt.