An equity release mortgage is a scheme which is growing in popularity. It is something which tends to be available to people from the age of 55 who have finished playing for their house in full. How it works is that the home owner can get a new mortgage on their property for a certain lump sum. The mortgage runs for the rest of their lives and they will not have to pay anything back. Once the home owner(s) no longer need their house, either because they die or go in to a care home, the property is sold. Then the sum borrowed is paid back, plus the interest and the remaining value of the house would go in to the home owners estate.
It is something which people do so that they can get hold of some of the money form their home without losing everything. If the value of the property goes up, they will still benefit and there will still be equity to be inherited by the persons family.
It can be a way to get some money in later life without worrying about spending all of the inheritance. It is a way to make use of the money toed up in an asset that you would not normally be able to release.
Many people use it for emergencies when they do not have enough money to pay for things or to be able to give their children some of their inheritance early. It means that you can be more flexible, rather than waiting until you die for your assets to be sold and the money distributed. It is favoured over other similar schemes because it is not the full value of the property and so any gain in value of the property will still be applied. It means that the amount of money that is got out of the house, when it is sold will not be reduced significantly. In schemes where you borrow the full value of the house, when it is sold, the financial institution gets all of the uplift in price.
There are pros and cons of using this sort of scheme. Obviously it will allow you to have some extra money but you will pay interest for it. It is possible that you will get reduced benefits because of the money raised from this sort of scheme and the money raised is not as much as with other ones. The possible inheritance will be lower but it will allow you to protect some of the house so you know there will be some inheritance but you will also have some money to keep you going too.