Home equity release is fast becoming a financial solution taken by UK’s population of senior adults. During the second quarter of this year alone, the Equity Release Council had established that as much as £971 million in equity release loans were availed by Britons aged 55 and older.
Many do so in order to cope with the loss of their spouse, when preferring to live independently in the home where they raised their brood. After all, maintaining a house requires extra funds that a state pension cannot provide.
Moreover, the Centre for Ageing and Demography of the UK National Statistics Office released a report in August 2019 that describes the dramatic change in the structure of the UK population. According to the report, there are more older people making up the UK population, since previous generations had produced fewer children. The only factor driving a rise in the number of people residing in the UK are the migrants. .
The report also said that Britons today tend to have a longer life span. Generally, most British men are said to live up to 79.2 years old, while British women often survive the death of their husband up to age 82 and beyond. Yet senior citizens who have to survive after the death of their spouse, face financial and health issues while living alone.
Seniors Address Extraordinary Financial Needs by Way of Equity Release Mortgage
In seeking professional advice from financial experts, many older adults in the UK learned that there is a financial facility offered exclusively to senior homeowners. Availed by way of an equity release arrangement, a lot of older Britons were able to borrow a percentage of their property’s value, without having to face the burden of making monthly payments.
The amount borrowed plus the total interest compounded on the outstanding balance will be settled through the sale of the property; but only when the senior borrower dies, or when he or she needs to enter a nursing home for long term. The scheme works on the principle that a real property appreciates in value and therefore can be sold in the future at a higher valuation.
It is possible that the proceeds from the sale of the property could exceed the total amount due on the loan. The borrower’s heirs would still stand to receive the residual value, once all payments due on the mortgage have been applied.
On the other hand, to avoid burdening heirs with unpaid obligations arising from an equity release mortgage, the UK Equity Release Council, requires the incorporation of a “No-Negative Equity Guarantee” to the mortgage contract. It is a clause that constrains the lender to consider the mortgage paid through the sale of the property. That is regardless of any resulting deficiency, in case the proceeds of the sale is less than the total amount due. .
Using an equity release calculator uk lenders carefully evaluate the value of a property. That way, they can ascertain that the amount loaned out as equity release plus compounded interest, can be adequately covered by the future value of the mortgaged property.