Equity release is a programme that you may have heard of that allows a borrower that owns a home, to get out the equity in the property, without losing the home or having to move. The programme can pay out a lump sum, monthly payments or a combination of both. The end result is perhaps your ability to travel the UK for free, well at least under one definition. Learn what this means as you read along.
What these Products Have Offered
These equity release programmes have allowed people to handle their own finances and that means that there has been less government intervention, as well as helping with the economy as people have the money they need.
The programmes have allowed people to actually get the equity out of their home and use it the way they want to and for what they need too. They have been able to travel the UK for free practically, as they now have their money from their home to use.
Using these types of programmes have helped many people and again allowed the individuals to handle their finances without having to go to the government for help. This has lifted a huge burden off the government and allowed them not to have to spend as much money as well.
Travelling for Free
By now you are feeling a little teased on how you can travel around for free. It is only in a sense that your travel is free. After all, you earned the money that became equity in your home. You paid taxes on it and you have to pay hotel, food, and other travel costs whenever you go about the UK.
By “free” it is meant you receive your equity tax free in a lump sum or through a drawdown equity release plan. This is money you’ve paid taxes on as it has turned into equity in your home. Either you paid out right for your home or you had a mortgage you paid on. Either way it was income that allowed this to happen. So in a sense you get to travel for free now.
Helping the Economy
Equity release plans are not only helping you, but you are in a way giving back to the community. When money is tight you won’t spend it. In retirement you have a limited pension that has to last until death. For some this pension is more than enough, but the majority of home owners are property rich and very cash poor. It makes it difficult to spend money except on absolute necessities.
When you release equity, you get to help the economy. You now feel more comfortable to spend money on such things as travel instead of the necessary expenses. When you put money into the economy it helps to stimulate it. The affect is that more people gain jobs because there is more demand on products and services. If you are someone who enjoys helping others and doing your part for the economy as it benefits residents of the UK, this is one way you can help out.
Disadvantages need Assessing
Certainly there are benefits to equity release. By now you have a good idea of what those advantages are and what you like about them. Yet, there are downsides and it would be remiss of this article not to go into the details.
Anytime you take money out of your home it means you have either sold a part of the home to a third party or you have used a lifetime mortgage which compounds interest until repayment is made. Repayment is not a monthly option, but rather an end of life situation. The home is sold usually to repay all interest and capital sum. If the home is not sold often a life insurance product is used to cover the debt.
It can affect the inheritance you leave behind. The more interest that accrues the less equity left in the home for your family, which in turn means the inheritance shrinks. Depreciation issues on home value can further reduce the leftover equity.
All of this has helped to boost the economy in some ways and in different sectors of business like your ability to travel the UK for free – in a sense. It has allowed more money to be spent and for that money to be put back into the economy. Money stimulates the economy, which means better housing values, more employment, and potential inheritance benefits for your family.