If your age has already clocked 55 and above, it may not be easy to get a loan from a financial institution. This is because they may consider you to be a flight risk borrower. They know the chances of dying are high and you are not far from retirement. That’s why many people that are 55 and beyond are opting for equity release. It’s basically a type of a loan that’s tied to the market value of your property. The good thing is that the lender can’t evict you from the house. They have to wait until you have gone back to your maker to sell the property and recover the debt. But you might be asking yourself how such a huge of money can be used. Below is a compilation of reasons why people are applying for equity release.
1. Clear Credit Card Debt
According to data collected from various financial institutions, most people regard Responsible Equity Release as the last option when they are not able to offset their credit card debts. In fact, a credit card debt can be a pain in the neck especially when retirement is around the corner. This is because it causes your credit score to decline drastically which means that most lenders can’t trust you with their money. Having such a debt when age is already catching up with you can really be a huge burden because you may not have access to disposable income that you can use to clear the loan.
2. Gift Loved Ones
As an older person, you might want to assist your children or grand children in buying their first home by offering to pay the deposit. You might also want to give a few of your dependants a huge amount of money that they can use to start a business. Nowadays most youths are opting to be their own bosses because there are not many opportunities in the job market. By giving them money, you increase their chances of thriving in their venture because they will not need to borrow money from banks. The advantage of equity release is that the money is exempted from taxation and the interest is not subject to change regardless of changes in economy.
3. To Enjoy Life during Retirement
The compounded interest of your personal savings may not be enough to enable you to enjoy your sunset years. You might want to go on vacation at least once per year to escape from winter and return during summer or Spring. With such a lump sum figure, you can afford to pay for a flight and accommodation. You can even buy yourself a nice car because you don’t have many responsibilities.
4. Top up Retirement Earnings
You will still need to pay bills even after you have retired. Apart from buying food supplies, you will need to pay for electricity, water and probably internet. If you have a car, you will need to cater for some of the repairs because the insurance company will not pay for minor maintenance expenses. These are just but a few of the obligations that you will have to fulfill. With equity release, you can top up earnings from your pension scheme and live a stress free life.
5. To Remodel a Home
Remodeling a home is an expensive affair. This is because the materials and labor cost a lot of money. For instance, you need more than $10,000 to be able to remodel the kitchen and the bathroom alone. If you want to replace a worn out roof, you will need to double the figure or you will not be able to finish the project. With an equity release provision of at least 100,000, you can be sure that you will be able to meet the cost of such projects without straining your pockets. The advantage is that the lender will allow you to continue staying in your home and your debt can’t exceed the value of the house, which means that you leave an inheritance for your dependants.
6. To Clear Existing Mortgage Loan
Most mortgage loans are designed to be payable within a period of 25 to 30 years. At the age of 55, it’s obvious that you are not far from clearing your mortgage loan. With an equity release loan, you can finish paying such a loan much faster. In fact, you can opt to make a lump some payment. The advantage of this strategy is that you are able to spare your monthly contribution for other purposes.