Equity release can be used for a variety of purposes, including:
- Paying off debts, such as outstanding mortgages or credit cards
- Paying for help around the home, including domiciliary social care
- Purchasing a new car or other 'large ticket' item
- Providing financial assistance to your children and grandchildren - perhaps with a deposit on a house or to help them through university
- Taking a holiday of a lifetime, perhaps to visit family living overseas
- Adapting / improving your home to enable you to remain living in it independently for longer
There are a number of benefits, such as:
- Tax-free cash to spend how you wish.
- Access to a draw down facility in the future if required *
- No monthly repayments to make unless you wish to do so *
- Continue to own and live in your own home, rather than downsizing
- Interest rates can be fixed for life *
- No-negative equity guarantee, which means that if property is worth less than the mortgage, you or your beneficiaries will not have to cover the difference *
- You have the option to protect a percentage of the value in order to give an inheritance *does not apply to Home Reversion Plans
Lifetime Mortgages and Home Reversion Plans explained
There are two main types of equity release: Lifetime Mortgages and Home Reversion plans. Both types are regulated by the Financial Conduct Authority (FCA). By using an equity release product, a home owner can draw a lump sum and/or regular smaller sums from the value of their home, while continuing to remain living in it.
A Lifetime Mortgage is a type of mortgage where you can choose to extract your funds in a single lump sum and/or in smaller amounts over time up to the maximum limit agreed with the plan provider.
You retain full ownership of your home and any interest on the loan can be paid or rolled up. The loan and any interest is repaid by your estate when you either die or move to permanent long term care. If you are part of a couple, the repayment is not made until the last person living in the home either dies or moves to long term care. In other words, both you and your partner are free to live in your home for the rest of your lives. You can also elect to retain some of the value of your property as an inheritance for your family, meaning that you can benefit from releasing equity while ensuring you have something to pass on to your children.
With some plans you can make monthly interest repayments in part, or in full. That way, you can maintain the debt to the initial capital before interest. If you choose to make interest repayments, you still have the option to move to a roll up arrangement at a later date if you wish, but always discuss details with your plan provider.
How much can be released is dependent on your age and the value of your property. Some providers may offer larger sums to those with certain past or present medical conditions.
Should you require further information or advice on the possibility of taking out a lifetime mortgage, please get in touch.
Home Reversion Plan
A Home Reversion plan also allows you to access all or part of the value of your property while retaining the right to remain in it, rent free.
With Home Reversion, the provider will purchase all or a part percentage of your house. You will know precisely what portion of your property you have parted with and, equally, what has been ring-fenced for later use, possibly to leave in a Will. The percentage you retain will always remain the same regardless of the change in property values, unless you decide to take further cash releases.
At the end of the plan your property is sold and the sale proceeds are shared according to the remaining proportions of ownership. Again, depending on your age and medical conditions, you may be able to access more funds.
You will be provided with a tax free cash lump sum (or regular payments) and a lifetime lease, guaranteeing you the right to stay in your property rent-free for the rest of your life. There is no day to day interference and no restrictions in treating the house exactly as before; as a private home to live in freely, although the Home Reversion Company may insist that your home is maintained to a minimum standard. You will not receive full market value for your home.
The information relating to Home Reversion Plans is for information only as we are not authorised to arrange this for you. In this case we would be delighted to give you the contact details for our trusted partners who can advise on and arrange Home Reversion Schemes for you.
Kevin Norwood trading as Mortgage Source (Southsea) Ltd is a member of the Equity Release Council, committed to upholding the highest industry standards and only recommending plans that meet the standards laid down by the Council.