People need money for many things including financing their lifestyle, clearing longstanding debt, and reinvesting in their businesses. Unfortunately, funds are hard to come by in today’s economy as worries over Brexit and other economic issues persist. However, a constant store of value exists and people rarely take advantage of it. More specifically, home equity is a potential source of substantial income. Releasing this potential is possible through an Equity Release. Here are 5 facts you should know about Equity Release in the UK.
The Qualifications for an Equity Release
The value of your home should be £70,000 or more. It has to be in an excellent state of repair as well. Another condition placed by financial institutions on this financing scheme is that the recipient has to be 55 years and above. The property has to be in the UK as well. These conditions protect the financial institutions from potential loses. Remember, they are taking a great amount of risk when it comes to an Equity Release. For example, they have to wait a long period until they can recover their cash. This risk is only worthwhile if the value of the home is high.
The Regulations for an Equity Release
Previously, Equity Releases in the UK were under the Financial Services Authority. However, this body split into two organizations namely the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). That means the FCA ensures that Equity Release providers act ethically while the PRA examines their financial prudence. Both of these agencies fall under the Bank of England. Therefore, you can rest assured that regulations in the Equity Release market are numerous and effective.
Ownership after a Home Equity Release
Owners occupy seven out of ten homes in the UK. That means 30% of the people in the UK are living in rented homes. Some analysts place this figure as high as 36.5% of the population. People erroneously believe that they will become renters as well if they receive an Equity Release. However, that is not the case. An Equity Release does not lead to a change in the status of home ownership. The home is still yours. The Equity Release provider will only take possession of it if you default on your payments.
Home Equity Release and Mortgages
A mortgage is a legally binding agreement between a financial institution and a borrower. In this case, the borrower agrees to transfer the title of his property to the institution if he defaults on payment. This payment is for money the institution provided for the purchase of the home. That means the home is not free of lien. Therefore, many people feel as though they cannot get a home equity release on it. That is not the case. You can receive it as long as you use part of it to clear your outstanding mortgage.
5. Home Equity Releases Have a Fixed Rate
The funds you will receive from different organizations including banks and building societies have a variable interest attached to them. Variable means that the rate of interest you will pay on them changes based on several factors including inflation. Consequently, planning for such changes is difficult because of the amount of interest that you should repay increases as time goes. However, planning for an Equity Release is a straightforward process because the amount of interest you are to repay on it is constant. Click on http://www.responsibleequityrelease.co.uk/ for more facts on Equity Releases in the UK.
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