Understanding Equity Release

Posted on: 26 March 2008 by Gareth Hargreaves

With the continued rise in house prices more and more people are topping up their retirement income with equity release schemes.

Equity release is simply converting the available value of your home into a cash lump sum or a regular income.

Inflation and rising property values could now mean that your property is valued at a far higher price than when it was first purchased. The present value of your property, excluding any mortgage you may still have outstanding, is referred to as equity. This generally relates to the cash which may be released from your home.

Equity release schemes enable you to unlock some or all of the value held within your home. Quite simply, you exchange a percentage of the interest in your home for a tax free cash lump sum, a regular income or a choice of both.

There are currently many different types of equity release schemes available all with varying benefits. Working out which one may suit you best, or which ones you may be eligible for can be confusing.

Experts predict that the equity release market could reach as much as £100 billion over the next 10 years and the Financial Services Authority (FSA) announced that the industry is to be regulated from September 2004 to combat rogue selling.

As an increasing number of older people, eager to cash in on the value of their homes, take out equity release schemes, the opportunity for rogue dealers are significantly increased. It is therefore important that you seek advice you can trust before agreeing to a scheme.

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