Investing in a property is a big step to make. When buying a new house, you’ll have to make at least a 20 percent deposit and prove that you have enough savings in your account. But keep in mind that while the initial costs are high, the payoff will be worth it in the future.
If it comes to the point that you’re strapped for cash, and you have nothing left but your home, there’s no need to stress out because you can get the money that you need with your property. With home equity release, you can get another mortgage with your existing property as collateral. And another good thing, you can also get a fraction of your home’s value, without having to move out and look for a rental home.
Still wondering what you can get out of home equity release? Read on below to learn more.
What are the benefits that consumers get?
It can’t be emphasised enough that equity release is a quick source of money. While the interest rate you get is a bit higher than your first mortgage, it’s still lower compared to other consumer loans and credit card interest. This is one of the reasons why consumers opt to borrow against the property value so they can pay off their other debts and loans. It’s also a good way to consolidate all your existing loans so you can make a single payment with a lower interest rate.
What are the benefits that lenders get?
Lenders love home equity release because they can earn more from it. Sure, they’ll make money off a buyer’s initial mortgage, but they will make more with equity release. If the time comes when the borrower cannot make payment or defaults, lenders can keep the money earned both on the first mortgage and the equity loan. They can also repossess the house and sell it again to another borrower.
How should you use your home equity loan?
Yes, an equity release option is an easy way to get cash, but you need to be smart when it comes to spending so you can make the most out of it. If you don’t, you’ll end up having the same problem and experiencing the cycle all over again. As a responsible borrower, you have options for maximising the loan. Having a reliable and steady source of income will make it easier for you to pay off the loan and take advantage of its low interest rate. So, if you’re buying a second home or want to consolidate all your debts in one loan, this is the best way to go.
Keep in mind that you still need financial control even though equity release seems like the easy way out of your troubles. However, don’t make the mistake of spending and relying on loans to pay it off. Before making the decision to borrow against your home, assess your financial situation and make sure you have a sustainable source of income to meet your repayment schedule.