Property Rescue Blog

Equity release schemes are usually targeted at the elderly, as a way of generating capital from their property, whilst being able to continue to live in their home.

There are a number of different ways of releasing equity on your home, but the most popular are either a longer term mortgage or a home reversion. A home reversion is where the homeowner sells all or part of their property to a reversion company and gets either an annual return or cash lump sum.

A home reversion can be a used to relieve debt. It provides the homeowner with instant capital which can be used to cover repayments. The downside is that once the capital has covered the debt, the homeowner is often left in a precarious financial position with no equity left in a home they only part own. Re-mortgaging, although a popular choice, often adds to financial distress. In many cases repayments on a secondary loan, when coupled with the payments on the initial loan actually increase the debt.

Current equity release schemes are targeted at the elderly for a reason. Most schemes require the lender to re –pay the loan on death. In a lot of cases, this reduces the estate of their heirs and helps keep inheritance tax down. They are not designed for debt consolidation per se but more to allow pensioners the luxury of benefiting from capital that is tied up in their home without having to move house.

Sell and rent back has emerged due to the increasing need for people to release capital from their homes before retirement age. The unfortunate reality is that for many, this is to deal with financial difficulties. The main advantages of sell and rent back are the expedience of the sale and the ability for the client to stay in their own home and if required, buy back their property once their financial problems have been sorted. The main issue of course is the fact that there is a big discount on the expected market value. But once this is offset by the money saved in interest repayments the discount may not be such a hefty deficit.