Using Your Mortgage To Generate Credit
By make money
If you need money for home improvements or a business, then you
could use your mortgage to generate the credit you need.
Although using your mortgage to generate credit shouldn’t be
your first choice, if other lines of credit are closed to you
then releasing equity from your home is a good way to generate
a line of credit.
When should you release equity?
Releasing equity should definitely not be your first choice for
generating credit. If you need money over a short period, then
try using credit cards or save up the money. You could also get
a personal loan. However, if you have a lot of equity paid for
in your property and you need a large sum of money, then equity
release could be helpful. Also, if other lines of funding are
not open to you because of poor credit or other reasons, then
equity release might be for you.
Remortgaging
One way to release equity in your property is to remortgage.
You simply have to get a new mortgage, borrowing more than you
currently owe on your property. This way you can make use of
some of the capital you have already paid back into your home
to consolidate debt or make home improvements.
Mortgage for life
Another way to release equity using your mortgage is to change
your mortgage to a lifetime mortgage. This means that you take
out a mortgage that will allow you to get a lump sum that you
can spend as you choose. The interest rates on the loan will be
high, and will be allowed to accumulate for your lifetime. When
you die, the loan is repaid through the sale of the house. If
the value of the loan and interest is more than the house is
worth, the lender absorbs the loss. If the loan amount is less
then the extra money is distributed to heirs according to your
will.
Home reversion
Home reversion is another method of equity release. Home
reversion means that you sell a proportion of your house to a
company, who will give you a lump sum in return. When the house
is eventually sold after death then the company receives the
proportion of the house that they paid for, whether that is
more or less than the loan that was given out.
Problems with equity release
Although equity release can free up much needed funds, there
are a number of flaws with the concept. The major problem is
the risk involved. You might be giving up a lot of home equity
that has taken you years to build up for a relatively small
loan amount. Equity release should be looked at as a last
resort, but if you know what you are getting into then using
your mortgage to generate credit can help you pay for items
that you need or to consolidate high interest debts.
About The Author: Peter Kenny is a writer for creditcards-gb
For additional articles and an extensive resource for
everything about credit cards, please visit us at
http://www.creditcards-gb.co.uk and
http://www.thriftyscot.co.uk/Mortgages/
Ray Burton is a personal training business owner, online writer and growing net entrepreneur. He is also the author of the controversial workout e-book, The Fat 2 Fit Program which is also part of his passive income sources along with the membership site FitterFast.com.
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