Use the Equity in Your Home
Many people these days are asset rich and cash poor and some of them don't even realise it. This is because their assets are tied up within the property they own or are buying. Equity is simply the difference between the market value of your property and the claims held against it. For example, if your home is worth £100,000 and you have paid off £60,000 of your mortgage, you have £40,000 worth of equity.
A ‘home equity loan’ (or ‘equity release’) is the term used to describe the way in which you can benefit from the value of your home without having to move out of it. It allows you to gain access to the money which is tied up in your home and use that to fund other projects or purchases.
Home equity loans against the equity in your property enables you to borrow a percentage of the equitable value. You agree the best interest rate on the loan and pay it back over an agreed period. Then the loan is settled in full when you sell the property or by your estate (usually next of kin) if you should die. The benefit of this kind of loan is that the interest rate is likely to be lower (if not the best rate loan) as the lender has the guarantee that you can pay the loan back because of the equity in your property.
House valuations may have changed significantly for many areas recently, so it is important to get a current valuation before making any decisions on credit.
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