Your home is your biggest asset; it is also the biggest financial commitment you have made throughout your life. So, is it so bad that you want it to work in the best way it can for you?
You only receive equity if you have a capital and interest mortgage. This is where you pay back both the interest and the capital. When you first start paying your mortgage payments you pay back more interest and very little off the capital, but this balance readdresses itself over time. The longer you are paying off your mortgage, the more capital you would have paid off.
Depending on how long you have been paying your mortgage off, will depend on how much equity you have developed in your property. The equity is what you technically own, rather than the part you are still paying off.
If you have equity in your property, you may be able to access some of this in the form of a loan or other borrowing that is secured against your property. ‘Equity release’ is a means of you being able to use your investment (your home) to borrow money, when you need it.
Equity release, or reverse loan as it is known in some quarters, has been around for a while, and was originally aimed at seniors being able to access money, directly from their property, once they had retired and had limited means to pay back a traditional type loan. However, the market and the product has changed significantly, meaning that anyone who owns their home can access the equity within it. The amount of equity depends on how long you have been paying off your capital and interest mortgage, but if you have been chipping at it over the years you should be able to access the equity within it.
These ‘loans’ that have been made against your property are not always strictly loans. If you are using your property as a way of securing those funds, how you pay this money back to the lender is different and can be done in a number of different ways. With a traditional loan, you have another credit check and you have a term in which you pay the money back, with a set payment that is made so you can pay the money you have borrowed back to the lender. With reverse loans and some equity release plans the money is only paid back if you move house, or if the owner dies.
Historically, people who have used their property as a means to access money, rather than applying for a traditional loan, have borrowed big. Of course, as it has already been stated, the amount you can borrow is only as high as the amount you have paid off your mortgage. The borrowing number is usually in the thousands as opposed to the hundreds, and the money is used for a number of different things.
If you have been paying into your capital and interest mortgage over a number of years, equity release or reverse loans could be an ideal way to borrow the money you need.