A remortgage equity release is exactly what it sounds like. It is a remortgage that releases the equity built up into a property as a cash amount. This is a remortgage that can be helpful for seniors, especially for those that are having difficulty making ends meet on their retirement savings.
If a homeowner has been paying on a property for a considerable time there is likely to be a large amount of equity in a home. It is also possible the home is almost fully paid off. In this case the lender would loan up to the value of the home, minus any debt on the property, and that would give the homeowner access to a considerable amount of cash while in retirement.
The disadvantages of this kind of remortgage would be that the debt on the home is now greater and there is less of an asset to leave to beneficiaries at the time of death. If a charity were to inherit the home then there is less to be inherited if the home has a higher debt. It could put the home into a negative equity situation if the entire equity is released and home prices decline. Another disadvantage is that there is an age limit for the homeowner as to the length of time the remortgage term can be, and in most cases the age limit for borrowing on this type of remortgage is 56 years of age. This should be a question for a lender when looking into an equity release remortgage.
The advantages can be many. The most obvious is that there would be a lump sum of money to be used in what way the homeowner would see fit. It could be used to pay off debt, to offer a part of inheritance ahead of time, to pay for medical care, to renovate a home to be more accessible for a senior, and also to invest into a retirement fund or business to provide more security further into the retirement.
In the event of a death of the homeowner the property will have the debt of the remortgage. This of course would have to be paid by any funds obtained from a sale of the property or by funds from the estate. This lowers the inheritance amount and therefore inheritance taxes. This could be an asset to the family while still allowing the homeowner to enjoy their life more fully with accessible funds.
Once the equity release remortgage is obtained, the homeowner has the right to do what they want with the cash obtained. Many believe that it can only be used for medical debt repayment, but that is not true. As mentioned it can be used to make a home more senior friendly, it can be loaned to a family member, or it can even be used to pay for a family holiday. So the common held belief that it must be used for debt is false. It is the homeowner’s money and can be used for whatever they deem appropriate.
One important consideration is that since the remortgage equity release brings debt upon the property then it should be understood that it could cause a homeowner to lose their home should the debt fail to be paid in a timely manner. It should therefore be carefully considered as to whether this is the best decision for the home’s owner. An equity release remortgage should be considered on an individual basis and the assistance of a financial planner or remortgage expert could be helpful.
