Home equity loans (also known as reverse mortgages) are a popular way of accessing extra funds by using the equity built up in your home.
These loans allow you to borrow the equity in your home, while you still live there. It is an attractive option for many borrowers as the repayments do not have to be made until the owner of the real estate either dies or moves into long-term care. As most retirees do not have a regular income, these loans are a good option. Usually the loan is paid in full out of the sale of the property. Home owners over the age of 60 are able to borrow between 15% and 45% of the value of the property.
Borrowers taking out equity loans can take the funds either in one lump sum, or in smaller, regular installments, and voluntary repayments are treated as surplus and can be accessed at any time. Customers should contact a mortgage advisor to discus their options before taking out a reverse mortgage, as there may be implications for pensions and tax assessments. How much you borrow will depend on your personal circumstances. However, it is important to decide how this loan will affect you overall.
You can have access to additional funds while still living in your home and retaining ownership. This is good news for borrowers who need extra funds but do not wish to move. Using an equity release loan enables you to access extra funds on top of your pension or superannuation policy, therefore topping up your weekly or monthly income and budgets.
Reverse mortgages can be more expensive than traditional loans and can be restrictive, with few added benefits. You are accumulating interest over the life of the loan because you do not make regular repayments, which can result in the final loan amount that needs to be repaid once the home is sold becoming greater than the equity left in the property. You can protect yourself by getting a ‘no negative equity guarantee’ from your lender.
This loan suits home owners who own their own home but do not have enough funds for living expenses or for other investments.
For more expert advice on equity loans, call us or submit your details on line and talk to a trained mortgage finance broker about great Sydney mortgages.