5 Different Types of Equity Release Mortgages

What is it and How can it help you?

09:20 17 March 2013

An equity release mortgage is a mortgage that allows the owner of the house to stay in their home for life all the while earning money continuously from their home.  It is extremely useful for the older population who do not plan on leaving their home to a loved one.

 

The downfall of this type of program is that your home is usually the collateral for this type of program, and it is usually the repayment of the loan upon the time of the death of your beloved mother or father.

 

There are several different types of equity release mortgages out there in the market for the nation. The several different types are what give you the best quality of life depending on which option the owner chooses.

 

There are five main types of the program currently available.  They are a lifetime mortgage, interest only, a home reversion, a shared appreciation mortgage and lastly a home income plan.

 

• Let us first discuss the lifetime mortgage. The lifetime mortgage is a loan that allows you or your loved one to maintain title of the property.  The loan adds compounded interest on top of the principal balance and it is paid back when the owner moves out or passes away.  This occurs when the house is sold at that time.

 

• An interest only loan is a loan that the owner of the property pays only the accrued interest while they live in the home.  The loan is paid back at the time of the death of the individual. 

 

• A home reversion program is you sell a beginning portion of your home to a third party.  The benefits of this type of program are that you get an additional income while you are still alive and living in your home.

 

• The last two types are a shared appreciation mortgage and a home income plan.  The main difference between these two are is that the latter one takes the capital from the loan and applies it to an annuity.  The appreciation mortgage uses the capital in order to gain the benefit of the of the property growth for the company.