How to Fund Your Dream Holiday with Equity Release

As a homeowner, one of your greatest dreams is to cash out on your estate sometime in the future. Usually, that would only happen if you trade off a portion of your assets.

However, there are certain exceptional cases. Situations that allow you to retain your asset as you earn some income out of it. That’s how sovereignboss defines equity releases.

So if you’re looking for that dream holiday, it’s time you considered equity release.

Who Is It For?

Equity release is ideal for estate owners aged 55 years or over. People close to or in retirement who want to travel and experience the world. But as you already know, financing your dream vacation is not easy.

You need lots of capital to go around, and that’s where equity release comes in. As an asset owner, there are various methods of obtaining the money you release, such as lump-sum payments and smaller, cumulative payments.

What Are Your Options?

When it comes to equity release, you can choose from two main options. We have the lifetime mortgages and the home reversion plan.

In the lifetime mortgages plan, you secure a mortgage loan. As expected, your home is the collateral. The loan attracts compound interest throughout its term. You then repay the benefits the loan accumulates through the sale of the property. Usually, when the homeowner passes on or moves into a new permanent residence.

In most cases, the new residence is long-term care. The lifetime mortgage schemes have certain advantages. The most notable benefit is the provision for retaining a share of your property value as an inheritance.

On the other hand, a Home Reversion Plan involves the sale of your property to a home reversion company. You can choose to sell a portion of or the entire estate to the company. The arrangement is that the company pays you an agreed lump sum or drawdowns.

What Are the Main Advantages of a Home Reversion Plan?

Firstly, you remain the legal occupant of your home until you pass away. And the best part is that you don’t have to pay any rent. When the plan ends, your estate comes up for sale. The lender then shares all the proceeds from the transaction with any of the remaining proprietors. Remember that this only happens if you had ring-fenced a portion of the property. Otherwise, only the lender gets the earnings.

Like the Lifetime Mortgage scheme, Home Reversion Plans makes provisions for retaining a share of the estate for inheritance or other personal use. The only drawback is that you still incur maintenance costs as well as insurance.

How Viable Is Equity Release?

Equity release offers you the option of funding your vacation hassle-free. You no longer have to sell your property upfront before going on vacation. Instead, you are still the legal owner of your property.

But how secure and viable is it?

For starters, there are legitimate bodies such as the Financial Conduct Authority and the Equity Release Council. These bodies control the equity release market, ensuring all transactions are above board. According to ERC, interest rates should either be fixed or slightly variable. ERC also protects the property owner from losing ownership of the estate. They can stay in their homes until they die or move out permanently.

Most important is the No Negative Equity clause. The clause ensures there’s never a negative balance after you sell the house and pay all the incidental expenses. As the estate owner, you cannot use funds to offset the mortgage over and above what you should have earned out of the arrangement.

What’s Our Takeaway?

An equity release plan is undeniably one of the most viable options for funding your vacation. Just remember to do your due diligence before entering an arrangement with anyone.

At the very least, ensure you only engage companies that adhere to the conditions outlined by the Equity Release Council. There’s no limit to how much of the world you can explore using your estate value.

Take that trip of a lifetime now!