I’ve seen a lot of adverts recently for Equity Release, does anyone know how it really works?
Equity release has two meanings.
For the general public it refers to a specific type of mortgage available only to the elderly who are asset rich, but cash poor. In effect it means that they can borrow against their property and use the cash to enhance their lifestyle or pay for needed repairs to their property.
The interest is rolled up, so no monthly payments until they either die, go into care, or sell the property.
It is also used on some occasions to mitigate Inheritance Tax, as the amount owed at death reduces the value of their estate.
For a property investor it just means refinancing an existing property to release cash so you can use it to invest in more property.
Discover more about intelligent finance at our Property Finance Masterclasses.