There are many different uses of equity release loans. These loans are offered through banks, credit unions and non-traditional lenders such as relatives and friends. Equity release loans are completely tax free and are used for whatever you want (provided that it is within the law). The most common uses of equity release loans are: home repairs, paying off unsecured credit card debt, augmenting income, and purchasing residential properties. If you are in need of one of these loans to help with your situation, it’s important that you understand the process so that you can make an informed decision. Here are some helpful tips:
uses of equity release
* Refinance your mortgage into one of these retirement loans. By refinancing your mortgage you can either choose a fixed rate or refinance into an adjustable rate mortgage. Both have their advantages and disadvantages, but if you can qualify for tax-free retirement income and use your equity release funds to repay your mortgage, refinancing may be your best option. This will also allow you to reduce your payments each month, which will give you instant extra money in your pocket.
* Use your equity release funds to pay off your tax-free cash advances for home improvements. Mortgage lenders often require you to repay part or all of the loan amount if you purchase a new home or if you sell a home within a certain period of time. If you have both mortgage and home improvement loans, you can choose to repay the interest portion and use the money towards your home improvements. In most states you can deduct up to 50% of the interest paid on home improvements as long as you’re making them to enhance your property value. This will help you pay off your home improvement loans much faster.
* You may also want to consider a home reversion plan using your equity release. If you have a home equity loan, you may want to refinance to a lower interest-only mortgage to make your payments more affordable. However, if you have a higher interest-only mortgage, it may not make financial sense to refinance. When your current interest rate is lowered by 2%, instead of cutting your payments in half, you’ll end up spending more on interest payments than on your actual principle. Using your equity release may involve a home reversion plan, which will effectively increase your home’s value while lowering your payments.
* You may also want to release equity release funds to pay for other smaller debts. If you have a large number of credit card or store card debts and multiple loans to pay off, it can seem almost impossible to clear up your debt without increasing your debt to income ratio. However, by utilizing your equity release funds, you can pay off these debts and then save the money you would spend on their interest charges over the life of your mortgage.
The uses of release of equity and conversion are fairly commonplace. However, one thing you should be careful of is using the funds for personal expenses and credit card bills. You should also make sure you use the release proceeds in such a way that you will be able to deduct them as an investment in your estate when you die. It’s important to remember that any potential tax-free cash generated by the sale of your release proceeds must be kept in trust to benefit your family in the future, just as you would any other inheritance.