Types of Equity Release Schemes

There are a number of equity release schemes that have been used in the mortgage market at some point. Many of these programs could be beneficial to you if you are looking to secure a mortgage. Here are a few of the different types of equity release schemes that may be available to you.

Lifetime Mortgage

One of the most commonly used types of equity release schemes is the lifetime mortgage. With this type of mortgage, you are going to have a loan that lasts for your entire life. With this type of loan, you are not going to have to make any type of mortgage payments while you are alive. The interest that is accruing on the loan is not going to have to be paid while you are alive either. Once you die, the property is going to be sold. The money that is earned from the sale is going to go towards repaying the amount that was borrowed plus interest. If there is anything left over, it will go to your beneficiaries. The amount of money that you can borrow is going to depend on your age. In most cases, you have to be at least 55 to qualify for this type of mortgage.

Shared Appreciation Mortgage

Another type of equity release scheme is the shared appreciation mortgage. With this type of loan, the lender is going to give you a lump sum of money that you can use. You are not going to have to make any payments back to them during the life of the loan. Then, when you sell the property, they are going to get the amount of money that was borrowed and a certain percentage of the appreciation in the property. The good thing about this type of loan is that you could potentially have no cost if your property does not appreciate in value. However, if the property appreciates rapidly, this loan could cost you quite a bit more than the other option that you have.

Interest-Only Mortgage

As the name suggests, with this type of mortgage, you are going to have to make monthly payments that are equal to the amount of interest that is accruing on your loan. You are not going to have to address the principal balance that you borrowed during the life of the loan. Then, when you sell the property, the balance of loan is going to be repaid with the profits from the sale.

Home Income Mortgage

Another type of equity release scheme is the home income mortgage. With a home income mortgage, you are going to get a certain amount of money from the lender. You will then use that money to are just an annuity contract that is going to provide you with a certain amount of income for life. You will have to make interest-only payments on the mortgage out of the money that you receive from the annuity payments. Then, when you sell the property, the proceeds will go to pay off the principal of the loan.

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