EQUITY RELEASE Meaning and
Definition
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Equity release refers to a financial arrangement that allows homeowners, typically those who are retired or approaching retirement age, to access the value tied up in their property without the need to sell it. It is a means of unlocking the equity within one's home and converting it into a cash lump sum or regular payments.
The concept of equity release is particularly relevant for elderly individuals who are asset-rich but cash-poor. By utilizing an equity release scheme, they can effectively supplement their pension income or finance various expenses such as home renovations, medical bills, or travel plans.
There are two main types of equity release schemes, namely lifetime mortgages and home reversion plans. A lifetime mortgage involves borrowing against the value of the home while retaining ownership, with the loan and interest being repaid upon the borrower's death or entry into long-term care. On the other hand, a home reversion plan involves selling a portion, or the entire, property to a provider in exchange for a lump sum or regular payments, and the provider benefits from the proceeds when the property is eventually sold.
Equity release schemes are regulated by various financial authorities to protect consumers, ensuring that the terms and conditions are fair and transparent. It is essential for individuals considering equity release to seek independent financial advice and carefully assess the associated costs, risks, and long-term implications before making any decisions.
Etymology of EQUITY RELEASE
The word "equity release" is a compound term made up of two separate words: "equity" and "release".
1. Equity: The term "equity" comes from the Latin word "aequitas", which means fairness, impartiality, or justice. In the legal context, it refers to the quality of being fair or just and is often associated with the principle of fairness in distributing rights and benefits.
2. Release: The word "release" comes from the Old French word "relesser", which means to release, free, or let go. ultimately traces back to the Latin word "re-", meaning back, again, or away, and "lassus", meaning loose.
Therefore, the term "equity release" refers to a financial arrangement or mechanism that enables individuals, typically older homeowners, to access some of the value tied up in their property while still retaining the right to live there.
