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Releasing equity for home improvements

By Mark Gregory on the 30th June 2017

Most families across the country are opting to make home improvements rather than pay expensive house prices, stamp duty and moving costs. Instead of moving house, more people are improving their existing home, creating a better quality of living and increasing the value of their property at the same time.

Releasing equity is a popular option for over 55s seeking to fund home improvements. The amount you can expect to borrow is based on your age. The younger you are, the lower the size of equity release. Conversely, as you get older, the maximum equity release increases by approximately 1% each year. The highest release possible release is 55.5% of the value of your property.

The initial loan can be paid either as one lump sum or spread across separate payments. You are charged interest on the loan amount, just like you would expect on a mortgage. Depending on whether you chose to make repayments or not, will determine what the future balance of the lifetime mortgage will be.

Your decision to release equity means you can decide between committing to monthly repayments (as per a standard mortgage), or requesting the interest is added to the amount of the loan. If you choose the latter, repayment is only made when your home is sold after you pass away or move into residential care.

House prices have increased across the board, so this an ideal period to capture increased equity from your home. You can funnel loan costs back into your bank account by making savvy home improvement decisions that add immediate, meaningful value to your home, such as a loft conversion, basement or new kitchen. Equity release statistics revealed that 23% of households who opted for equity release in 2016 used the funds to finance home improvements.

It’s sensible to consult experts specialising in releasing equity. There are several loan options available for you to release equity from your home, including those taking into account various circumstances, including medical conditions. The firm favourite is a lifetime mortgage providing you with a lump sum (tax free) and no monthly repayments. Other options for you to discuss with your equity release expert include drawdown lifetime mortgages and the less popular home reversion schemes.

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