Equity release is a useful tool that people can use to invest in other areas. However, this is a fairly complicated subject and one that most people don’t understand and therefore, don’t utilise.
Investing has increasingly become a hot topic amongst millennials and many are cottoning on to the great effect it can have on their life if done early. There are lots of possible ways to invest and selecting which one is right for you is tricky.
Equity release investing, however, only really applies to those that own a home or have a mortgage on one, which is a big investment in its own right. Equity release used to be used to fund retirement but is now being used more and more by younger people wanting to buy a second home. But what exactly is equity release?
What is Equity Release?
Equity release can be used to free up funds tied up in your mortgage; essentially, releasing equity from your house/mortgage. When you buy a house it will be valued at a certain price and you will acquire a mortgage to pay it off over a certain amount of time. If, for example, your house goes up in value five years after you purchase it you might want to remortgage to be able to take some of the money out of your mortgage.
Great, now we know what equity release is, but what’s equity release investment?
Basically, this just involves taking this money and investing it in something else, and this could be anything, simple!
Purchasing a new property
This is by far the most common use for equity release investing and is most commonly done by the over 50s who still greatly value homes as an investment strategy. Traditionally only available to this age group, equity release was a great investment strategy and allowed the owners to acquire a lump sum of money with which to spend on holidays, housing costs or home improvement.
The housing market is still booming and is the very reason that equity release is a possibility. If we think about it, the only reason you can take money out and remortgage your existing property is because your house has gone up in value and the bank is willing to remortgage it.
Using this money to buy a new property is simpler because of this system. The banks will be more willing to give you a good remortgage offer and thus a new mortgage on a new house if you are doing it all through the same bank. It is in their best interest for you to have two houses on which you are paying interest on for the next 30 years and they will be very helpful in sorting that out for you.
Equity can be a complicated matter just as with any type of mortgage or finance-related systems. People are able to release equity from their existing home by remortgaging. If the house has gone up in value the banks will gladly allow you to release equity. Many people are using this as an equity release investment to put a deposit down on a new home. While there are many ways of investing and many other things this money could be put towards, using it in this way is still vastly popular with the older crowd and is gaining popularity as millennials purchase houses.