Difference Between Mortgages and Equity Release Uses
How to Use Equity Release
What is the difference between a mortgage and equity release? The main distinction is that mortgages are taken out for property, while equity release uses are taken out for money. Mortgages can be used to purchase land or property, but they can also be used as collateral against a loan from another source. Equity release uses are secured against your home through either an annuity or lifetime income plan. Both options offer to provide you with money when you need it most – in retirement!
A mortgage is borrowed money given by the bank on behalf of someone else who lends them the funds until such time as the person repays their debt (usually over 25 years). A Mortgage would generally take up less than 90% of somebody’s assets meaning there will still be some savings in the future due to the amount of equity retained.
An Equity Release is a type of home and/or retirement plan that works by giving individuals the opportunity to release some or all of their property’s value in order to receive an agreed lump sum payment from this arrangement, usually over 20 years.
Some people take out mortgages for reasons such as buying a new house when they can’t afford it with cash due to rising prices; whilst others will use equity release so they don’t have any debt at all. A mortgage has more advantages than an equity release though, because you are not reliant on your future income without the security of having something left in case anything goes wrong – like if you were unable to work ever again through illness or injury.