Equity Release Mortgage

An equity release mortgage is a loan taken out which is repaid using the equity of your property. This differs from most mortgages as it is for those who already own their property and have completely paid off the mortgage on it. This type of mortgage is for people who are seen as property rich but cash poor, meaning that they have a valuable house but they do not have a lot of money in their bank account to use as they wish. An odd situation to be put in but it can often happen to people who are retired. So if you need some extra money to live on or you want to make a big purchase, an equity release mortgage could help.

The way these equity release mortgages work is that the money that is loaned to you is tied into the equity of your property, so as soon as that property is sold the financial institution that provided you with the equity release mortgage is given the money that you borrowed plus interest. In some ways it can be seen as a reverse mortgage, rather than getting money so you can buy your property you are getting money which will be paid back from selling your property. Like all loans a equity release mortgage has an interest rate attached to it which means you will be paying back your provider more than you will be actually borrowing off them. It also has a range of other conditions attached to it, the most common of which is that you must be an elderly citizen (usually over fifty five) to be eligible for the loan and of course, you must have full ownership of your property.

Get A Quote Online

If you pass these two requirements of being over fifty five and owning your property, you can get a range of different equity release mortgage offers from the internet. When you go online and get a quote, you will be shown different offers on these release mortgages from all the major banks and building societies in the country. The internet also has an abundance of online equity release calculators which can be used to work out the details of how much your loan's interest will be based on a few bits of information on yourself and your property. You simply need to enter this information into the calculator and you will be given an estimate on how much your equity release mortgage will cost you in interest charges and how much equity you can release from your property. Many equity release mortgages will have a fixed mortgage rate on them which means their interest will not shoot up as time progresses and you will know that your APR is set in stone.

The fixed rate attached to these mortgages is one of the clear benefits of these kinds of loans. Unlike many other loans you can borrow a large amount of money (depending on the valuation of your property) and have a fixed interest for the entire duration of the loan. Many loans do not have this kind of perk to it and it is one of the great things about an equity release mortgage. Using the internet is a great way to find the mortgage providers which give a fixed rate on their equity release mortgage offers.

Applying For The Mortgage

Once you have done enough research into how much you want from your provider and you have found enough quotes online you can pick the bank or building society which offers the lowest interest rate on their loan. To apply for the release mortgage you can make your application from the internet to save you a lot of time. It is best advised to talk through everything with your friends and loved ones before you make the application however. If your interest rate is too high, it could end up eating up a lot of the money from your property and leave you or your loved ones with little cash when the property is finally sold.

All of this depends on the amount you borrow of course but if you get a large enough equity release mortgage and you do not sell the property for some time the interest charges could have a significant effect on the amount of money you actually get when the property is sold. To ensure this does not happen to you, you should be absolutely sure that you are making the right decision by taking out the loan. To verify everything try talking to an adviser who will be able to talk you through anything you are confused about and will let you know whether it's in your best interests to go for a certain deal or not.

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