Equity release remortgage explained
An equity release remortgage allows home owners to unlock some or all of the equity that is tied up in their home.
Equity is the difference between the size of a borrowers current mortgage and the value of their property. Home owners with a house worth £250,000 and an oustanding mortgage of £150,000 will have £100,000 equity in their property. Once released this extra money can be used for any purpose.
People typically use the money raised through an equity release remortgage for home improvements, new cars, dream holidays, clearing credit card and loan debts, weddings, or to provide a deposit to buy a second home, possibly overseas. Those home owners who have not reviewed their mortgage arrangements for a while may find they can remortgage at a lower interest rate than their present deal.
There are three main types of equity release plan. Lifetime mortgage where a loan is secured on the property. Home revison where all, or part of the home is sold to a revison company who allow the home owner to live in the property until death. Sale and rent back where the home is sold in return for the right to rent it back for a fixed term.
As an equity release remortgage requires home owners to take out a new mortgage for a greater amount than the current mortgage, it is vital to seek independent financial advice to consider all implications before signing up to any scheme.
