Equity release is a way of gaining a cash lump sum secured on your home with repayment put off for decades.
There are two main types of equity release scheme: lifetime mortgages and home reversion plans.
Lifetime mortgages
These are the more popular of the two schemes and allow a homeowner to receive a cash sum and stay in a property, with the loan repaid from the sale of the home after death, or if the borrower moves into care. The principle is that rising property values will cover the interest on the original debt. Borrowers with lifetime mortgages typically don’t make monthly repayments, but defer or “roll up” the interest and capital so that it is repaid when the home is sold.
Interest rates are slightly higher than “mainstream” mortgages to reflect the “no negative equity” guarantee that they now offer as standard.
The older the homeowner, the more they can borrow. For example, a 55-year-old can typically borrow 15 per cent loan to value, while an 80-year-old can raise nearly half the value of their property. read more
Source:http://www.ft.com/cms/s/0/a23d683c-9c78-11dd-a42e-000077b07658.html?nclick_check=1
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. A mortgage loan is a secured loan in which the collateral is property, such as a home.
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