Home Equity
Equity release and reverse mortgages are great for retirees or home owners wishing to upgrade their property.
This type of home loan allows you to borrow the equity in your home, while you still live there. It is a tempting option for many borrowers as the repayments do not have to be made until the owner either dies or moves into long-term care. As most retirees to do not have a regular income, these loans can suit their needs well. Usually the loan is paid in full out of the sale of the property. Home owners over 60 years can borrow between 15% and 45% of the value of the property.
Borrowers taking out an equity release loan can take the funds either in a lump sum, or in smaller, regular installments, and voluntary repayments are treated as surplus and can be accessed at any time. Customers should contact a mortgage advisor to discus their options before taking out a reverse mortgage, as there may be implications for pensions and tax assessments. How much you borrow will depend on your personal circumstances. However, it is important to decide how this loan will affect you overall.
Advantages
You can have access to additional funds while still living in your home and retaining ownership. This is a great advantage to customers who do not want to move from their home or suburb, but need access to extra funds. Using an equity release loan enables you to access extra funds on top of your pension or superannuation policy, therefore topping up your weekly or monthly income and budgets.
Considerations
Reverse mortgages can be more expensive than traditional loans and can be restrictive, with few added benefits. You are accumulating interest over the life of the loan because you do not make regular repayments, which can result in the final loan amount that needs to be repaid once the home is sold becoming greater than the equity left in the property. You can protect yourself by getting a ‘no negative equity guarantee’ from your lender.
If you own your own home but do not have enough funds for living expenses then you could look at this type of loan. A reverse mortgage can also be useful for home owners who may be looking to retire in the next few years, or borrowers wishing to upgrade their property who need access to extra funds.
Using the equity you have built up is a great option for some customers. Get detailed and honest advice from an experienced Local Mortgage Broker.
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