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| Explain... | Equity Linked Mortgages |
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When you take out an equity linked mortgage, the lender takes a stake in the equity of your property and buy the remainder themselves. They lend you a smaller amount than is required to buy your property. Interest is charged only on the amount you have borrowed, not the full value. On the sale of your property, the lender receives the proportion of equity they own, so benefiting from any increase in property value. For example: You buy a house valued at £100,000. The lender buys a 20% stake in the equity. Your mortgage value is therefore just £80,000. On sale, your property sells for £150,000. The lender takes their 20% stake back on completion, giving them a repayment of £30,000 and so a profit of £10,000 on their original investment.
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