Equity release can be used by pensioners for many different reasons but one of the most popular uses is the funding of the education of their grandchildren. Funding the costs of college or university can be difficult for some parents. In such cases, grandparents try to do what they can. It is indeed a great sense of pride to see their grandchildren complete college or university and assist with researching online equity release information that can help achieve this goal.
The Concept of Equity Release
Equity release schemes allow homeowners to release cash against the value of their property. This is used as an additional source of income. This cash can be taken as a tax-free lump sum or it can be taken in as partial withdrawals, as & when required.
The Education Benefit
Equity release schemes do not only help grandparents to see the dreams of their grandchildren come true but parents can also make use of equity release schemes to help them raise the money that they need to support their children in college or university.
The fact is that due to government cutbacks in education funding students need to finance many things that they did not have to before. It is also becoming more and more difficult for students to get part-time jobs due to the recession. For these reasons, students need financial assistance more than ever before.
Qualifying for Lifetime Mortgage
In order to qualify for equity release, a person needs to be above the age of fifty-five and must be the owner of a qualifying property. More than one member in a family can apply for equity release but the youngest person needs to be over fifty-five years. If there is an outstanding mortgage on the property, it will be paid off as a part of the equity release scheme.
The age is just one qualifying caveat. You also need to inform the mortgage company of your health. There is a questionnaire to fill out that will be used to determine the longevity you may have. For some with illnesses a larger lump sum can be given at the start. For most it is about how long, approximately, the loan will be outstanding and thus the fixed interest rate that should be used along with the lower lump sum to ensure the value of the property is not exceeded.
Also as part of qualifying, you will need to show your income. This is particularly for interest only lifetime equity releases such as Stonehaven’s Interest Select Plan or more2life’s Interest Choice Plan. This is because you make an interest payment each month and affordability under MMR needs to be evidenced clearly by the equity release lender. The principle balance is not going to change since you make payments. This can be a more comfortable choice for some.
Using the Money Other than on Education
Equity release can be used by pensioners to help their family members in many different ways. What they do with the income is totally up to them. There are no restrictions. The cash is also tax free, so check out more online equity release information to determine what might work for you.
It all sounds great. You can pay for education. It is tax free money. You have something to live on if you need it. You also get the loan after you retire due to equity in your property. While there are always benefits to financial products, you must also know there are going to be drawbacks as well.
The first disadvantage is the home. If you had intended on leaving the home to your children as a place to live and for family to pass on through generations taking out a lifetime mortgage may not work. It requires you to sell in the end at least for most. The best way to pay off the mortgage is for a home sale. Most families do not have enough lying around to repay the loan upon death except through possible insurance benefits the owner had.
It can mean the inheritance is gone or there is less at the end. For some paying for education and other important things during their lifetime is better than waiting till the end. For others no inheritance can be disheartening. Ask your financial adviser if there is a way to still protect some of the inheritance your family can gain upon the end of the lifetime mortgage.
The fact is that due to unexpected changes and circumstances, family members will need financial assistance. However, some pensioners might apply for equity release to sustain their own needs. Whatever the purpose, equity release can be the solution. Discover online equity release information to help you make a decision.