June 19, 2024
Is Home Equity Release a Good Idea?

Is Home Equity Release a Good Idea?

Unsure of whether home equity release is right for you? Read this first.

Raising finances through using your home as an asset is nothing new. However, home equity has never been as accessible as it is right now. We are at the end of a huge boom in the housing market across the whole western world. Covid taught us to value our homes and improve or upgrade them where we can. Home equity release is a terrific way to do this. However, there is a stigma surrounding it.

Lenders market home equity release programs to older members of society. There is a mistaken belief that only those who have fully paid off their mortgage have access to this type of capital. This is not the case. The terms of the home equity release scheme are evolving to meet the needs of the modern home owner. Here’s all you need to know to unlock the finance potential of your home.

What is Home Equity Release?

The modern world features two kinds of home equity release. Both products do the same job, but with slight differences. If you have completely paid off your mortgage, you can use a home equity release product to unlock all the capital you have tied up in the building. The lender will limit you at a capped amount of the total value of your property. They do this to cover the fees of selling your home, should they have to repossess it.

It is this type of equity release scheme that makes us picture older members of society. Why? Because they are the only ones among us who have completely paid off their mortgage. They don’t mind unlocking the potential value because they will have to either downsize or sell potentially in the last years of their life.

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The second type of product you can now get to help unlock the equity in your home, is the HELOC. The HELOC stands for the Home Equity Line of Credit. This is a set sum that you can borrow depending on the value of your home. The main UK providers, https://www.selinaadvance.com/, allow you to borrow up to 80% of the value of your home, minus the amount you owe on your mortgage. This means anyone can borrow against their mortgage without taking out a homeowner’s loan product.

HELOCs are so beneficial because you buy the product once and borrow the amount you need. You unlock the full potential, but you don’t have to borrow the full sum. If your home is worth £100k and you still owe £10k on your mortgage, you could borrow £70k. However, if you only borrow £20k, you will only pay interest for that 20. The HELOC is a useful product for those that may want to perform multiple big purchases, or that want a full home refurbishment. It can help pay for other things, too.

Is Home Equity Release Right for You?

If you are a homeowner with big bills to pay, then equity release could be the answer. It’s as safe as any other financial product except you are in charge of what you borrow. It could be the finance option you need for your next business venture, school fees, or home redesign project.