Generally, if you are under the age of 55 years old, you will not be eligible for a traditional equity release scheme.
Both lifetime mortgages and home reversions, two different types of equity release schemes, are intended to be used by individuals over the age of 55 and the best deals on the schemes can be had by people over the age of 65.
In general, the older someone is, the more cash he or she will be able to release from the value in the property. But, where does that leave those who are under the age of 55?
Option 1 – Remortgage
One option available to those who are under the age of 55 to help increase cash flow is to take out a second mortgage against the home. Doing this is an effective way of using a homeowner’s property to raise the cash they need to do a number of different projects including home renovations, needed repairs, or even making large purchases.
For more information on remortgages and how it can affect your finances, it is always recommended to speak with a financial specialist before moving forward.
Option 2 – Secured Loans
From the borrower’s standpoint, the difference between a secured and unsecured loan is the overall interest rate – since lenders have a guarantee that the loan will be repaid, in repossessing the home, they are more likely to offer much lower interest rates to borrowers who choose secured loans.
Secured loans also have a longer repayment term than unsecured loans, giving borrowers more time to straighten out their finances and get the loan paid off.
Although these may seem like great benefits added to low interest rates, the longer the loan takes to get paid off the more the interest rates will add up over time, meaning the borrower could be paying back significantly more than the borrowed at the end of the loan’s terms. This is why lenders are comfortable giving out large sums in secured loans.
Another important point to think about when considering applying for a secured loan is the security used to take out the loan will be at risk. More traditionally, lenders will only allow a borrower to use owned property as security – although in some specialised circumstances other assets can be used.
This means, should the borrower not be able to make his or her monthly payments toward repaying the loan, the lender will have the right to repossess the property in order to recover the money at risk.
What about Unsecured Loans?
For smaller amounts of funding, lenders may also offer the borrower an unsecured loan option. If you are looking to borrow less than £25,000 an unsecured option will be the better choice 100 percent of the time.
Unsecured loans will not put the borrower’s home or other large, important assets at risk. If the amount needed is over £25,000, a secured loan is the better option, allowing the borrower to spread out the cost of this financing out over a longer period of time which is not available through an unsecured loan.