What Is Equity Release and How Does It Work?

equity release

Regarding regular mortgages, it’s generally a relatively straightforward process to refinance your home because you’re still working. But what happens when you reach retirement age or you’re even older? If you are a part of the older generations and you’re thinking about this type of mortgage, you should seek a mortgage broker because this is aimed at you. This type of mortgage can also be aimed at younger people with a family member looking for this option. All family members must be on board with this idea.

Is Equity Release a Good Idea?

The FCA heavily regulates these equity release mortgages (Financial Conduct Authority). Therefore, you must talk to an excellent FCA-approved mortgage broker or any independent mortgage advisor before making a final decision. These people are experienced individuals capable of answering any question you might have on the matter. In addition, a great mortgage broker will give you proper, impartial advice and guidance throughout the entire process.

Firstly, to answer the most asked question, one of these particular mortgages, specifically in the UK, represents a unique tool designed for people over retirement age who don’t have a regular earned income and are not working anymore. Still, they are dependent on their pension income. So it can also be called the “lifetime mortgage.”

Is the “Regular” Mortgage Different from the Equity Release Mortgage?

If you’re in the market for one of these mortgages, it is highly recommended that you have a younger family member with you. Preferably somebody capable of understanding what you’re looking for and who can explain to both you and the broker what the plan should be. And it never hurts to have a second mind there with you, to bring a different perspective. But, at the same time, you should consider a mortgage broker for assistance.

The difference between the two types of mortgages will always spark a conversation. A lot of people usually mistake the equity for the regular mortgage. In reality, the two couldn’t be any different from each other for one particular reason. On the one hand, it’s very easy to go through the process of a regular mortgage. You’re only asked about your income and your expenses. This procedure is done to ensure you’re able to pay back what you owe.

On the other hand, the main idea for the regular mortgage is that by the time you reach retirement age, you will have already paid it in full, and the property will then belong to you. That means you will most probably be working and be anywhere between 20 and 50 of age. On the other hand, the equity release mortgage was created specifically for the retired people—meaning those 50 and up. And you don’t need to pay anything until you are no longer around or move out of the home.

Reasons You Need a Mortgage Broker

mortgage broker can be your ray of sunshine on a cold, rainy day. These professionals are extremely important if you’re looking for a mortgage. They know exactly what to do, where to go, and what to ask, and they will be next to you, supporting you throughout the entire process of the actual loan. They are regulated by the state and act as a “mediator” between you and the bank. The existence of these brokers makes the entire process a million times easier.

Another great reason to hire a mortgage specialist is to simplify your life. You will never have to worry that you forgot to sign this paper or missed a deadline to send this document. They take care of anything that has to do with forms and are your direct connection to the bank. Most importantly, they exist to help you solve your problems and ultimately achieve your goals.

An excellent broker will always have your best interest in mind. They will always explain everything in great detail to ensure you are entirely up to date. And the best part is that most of them give a free consultation. And getting a free consultation means you don’t need to worry about your situation. You get to keep a few coins, and most of all, if you and your mortgage advisor of choice don’t see eye to eye, you are free to see another.

mortgage broker

Why Would You Get an Equity Type Mortgage?

Maybe one of the most asked questions regarding a mortgage, a broker, or anything in this area. The best answer, in this case, is to better your life. When you choose a mortgage, you do so to ease your problems. You give someone else the responsibility of taking care of all documentation, papers, and so much more headache while you get to enjoy your life. You’re not even responsible for paying. There are no repayments involved until the day that you’re no longer on Earth or until you move out of your house.

This type of mortgage doesn’t affect or impact your pension in any way, shape, or form. The money you get is simply a loan, not an income. You can borrow anywhere from 20% up to 60% of the value of your home or even between 80% and 100% of the property’s value if it falls into a home reversion scheme.

And because most people understand things better with an example, here is the most common one. Say you already finished a regular mortgage. You’re retired now, but you could use some money for home improvements, or maybe something needs to be fixed. What happens at this point? The answer is to hire a mortgage broker to help you with one of these mortgages. It’s also important to note that the reason for seeking the equity release doesn’t necessarily have to do with the house. Many people seek this type of mortgage when they realize they don’t have any savings and their health is declining. Getting a mortgage this way, you get to keep your beloved house while also getting a large sum of money.

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