You must be able to ensure that you can cover interest payments over the life of the loan Choosing a mortgage with a variable interest rate is riskyLifetime Equity Release Mortgage
The equity release mortgage is used to provide either a lump sum or monthly instalments of cash (the borrower can also choose to receive a combination of both types of payment). When the property is sold, the balance of the loan, including principal and interest, is paid in full.
Advantages
- Provides a larger income than the home income plan or interest-only mortgage
Disadvantages
- It will be difficult to estimate the amount of equity left in the property until it is sold
Home Reversion Equity Release Mortgage
The owner of the property sells their home (or a portion of the equity) to a lender, and receives a lump sum or monthly income. The lender takes a share of the proceeds when the property is sold, taking a share that is proportional to the amount of equity they purchased. For example, if you sell 50% of the equity, the lender will take 50% of the proceeds from the sale of the property.
Advantages
- You will always know exactly how much equity you own
- You or your heirs benefit from an increase in property value
- No repayments-even interest-in your lifetime
Disadvantages
- The lender will not pay market value for the equity
Look for a SHIP-approved Equity Release Mortgage
Plans that are approved by the Safe House Income Plan guarantee that you will never end up owing more than the home is worth, even if the property market changes, and no matter how much interest you accrue. You cannot build up negative equity in the property, and will not pass debt to your estate in the event of your death.
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