Equity release is a secured loan obtained against a property like any other residential mortgage; however, the main difference is that you are not required to make any monthly repayments of the capital loan sum. Security of tenure is therefore an important consideration for any applicant. This reassurance is provided by the industry trade body known as SHIP or the Safe Home Income Plans.
The lifetime mortgage is one of the most common equity release schemes that provide homeowners with several different options. One of these options is the drawdown equity release scheme which is one of the most flexible lifetime mortgage schemes. It has also been recognized as one of the cheapest schemes as well. The advantage of a drawdown equity release scheme is that you are provided with the option of reserving the lump sum amount which you can draw down in smaller amounts for future use thus allowing you to always have money available for when you need it the most.
Another great advantage of the drawdown equity release scheme is that interest is only charged on the withdrawn amount thus protecting inheritance. In most cases, fixed interest rates are offered by drawdown equity release providers and money can be saved on compound interest. Other forms of lifetime mortgages charge compound interest which is simply interest charged on interest. Eventually, homeowners need to pay tens of thousands of pounds only for interest. A lot of that money can be saved by opting for drawdown equity release schemes.
When it comes to drawdown equity release schemes, older home owners are allowed to borrow more than younger homeowners. The actual percentage of the value of the home that can be borrowed however relies on the provider. Each provider has different lending criteria which is why it is necessary for an equity release adviser to be consulted so that you can determine the most appropriate drawdown equity release provider. You will also need an equity release solicitor to verify identity to meet money laundering requirements.
The amounts drawn out from a drawdown equity release scheme can be used for any purpose. One of the best ways to use capital from equity release is to purchase insurance – home insurance, car insurance, or health insurance.
