Product:  Equity Release

Introduction

These types of product target borrowesr over 65 years of age who want to access equity built up in their homes and include reverse mortgages

Key Features & Advantages

Borrowers access the equity in their homes to fund their retirement.  Interest on the loan amount is capitalised and paid when the security property is sold.  The loan amount is alos repaid at that time.

Considerations

Of course, these products consume your estate and accordingly assets available for your estate on your demise are diluted.

Suitable for

People who are wanting to comfortably retire.

Example of product

Bluestone's Equity Tap

Further information

When you first buy a property, you pay a deposit and the bank lends you the balance of the deposit.  The amount of the deposit is the commencing equity in your property.  In other words, you would receive the deposit amount if you were to immediately sell the property after first acquiring it.

As time goes by, the balance of your loan (where it is a principal & interest loan) will reduce and the value of your property may increase.  As the diagram shows, the difference between the balance of your loan and the value of your property increases over time.

The difference is called "equity", which can be used to secure further borrowings.