Jargon Buster
Discounted cash sum
Understanding why you are not receiving
100p for every £1 worth of property you are selling
can be difficult. However, in order to continue living in
the property you do not need to pay rent, which on average
would be equivalent to 5% per annum of the property’s
value (eg on a typical £150,000 property rent would
equate to £625pm).
Equity
The value of your property in excess of
any amount owed on a mortgage or other loan secured against
it.
Equity Release
Unlocking the equity in your home in return
for a cash lump sum, a regular income or a combination of
both.
Estate
The value of your assets, including all
savings, possessions and property
IFA
An Independent Financial Adviser is someone
who can explain and help you understand the benefits of Equity
Release. They will provide advice on comparative plans from
different companies.
Inheritance Tax
A tax payable on the value of your estate
after you die. The threshold is set at £285,000 (2006/2007),
if your estate is worth more than this amount your beneficiaries
will be taxed at the rate of 40%.
Investor or Investing Company
The reversionary interest on your property
will be owned by a public company (plc), private investment
company, family trust or an experienced individual investor.
Lease and Agreement
The legal documentation comprises of a lease
and an agreement between you and the investor (or investing
company). The lease allows you to remain in your home (or
another property if you wish to move) until the death of the
surviving partner. At this point the lease is automatically
surrendered. The Agreement says that the investor will not
interfere with your right to enjoy the property without disturbance
so long as you continue to maintain the property to a reasonable
standard and that you will pay for buildings insurance and
community charge (just as you do now).
Negative Equity
Negative equity is where mortgage and loans
secured on your home exceed the market value of your property.
With a good Equity Release plan you will have a no negative
equity guarantee ensuring your family will not be left in
debt.
Valaution
A qualified valuer will inspect your property
and prepare a report that will outline the condition your
property is in, what the value of your property is and what
the property should be insured for.
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