Equity Release Schemes

Equity Release Schemes Advice

We have advisers nationwide to provide equity release schemes advice either in the comfort of your own home or via the telephone. The choice is yours. Call us for a free guide to equity release schemes.

There are two main equity release schemes available on the market, the first and most popular is the Lifetime Mortgage Scheme, this is where you borrow a sum of money and it is secured against your home. With this equity release scheme you do not make any monthly interest payments on the loan, instead the interest is rolled up and added to the loan and is repaid upon the death or abandonment of the home to go into residential care. There is a vast choice of these plans and it is important to take independent Equity Release Advice

The second equity release scheme is the home reversion plan, with this plan you sell all or part of your property to a home reversion provider and they give you a discounted lump sum for your share of the home. The reason the home reversion provider discounts the lump sum is because you will have the right to live in the property for the rest of your life and you will not be charged any interest on the loan.

LIFETIME MORTGAGES

Advantages

• lifetime Mortgages are available to those as young as 55 with most typically offering products to people aged 60 onwards.
• You keep ownership of your own home and could still benefit from any rises in house prices.
• You know how much money you will receive from the scheme at the outset.
• Possibility of leaving some equity to your heirs, depending on the size and length of your loan.
• Regulated by the Financial Services Authority

Disadvantages

• Your overall debt will grow over time, although this can be limited by only releasing money you need when you need it.
• The entire equity in your property may be exhausted, leaving nothing for your family.
• As you do not repay anything until the end of the loan, interest is added to the amount owed. You will therefore start to pay interest on this as well. As a result the total amount you owe will grow more quickly than it would with a loan where you are paying off interest during the life of the loan
• If you choose to repay the loan early, early repayment charges may apply.
• Your tax position and eligibility for means tested benefits may be affected, as might your options for moving or selling your home in the future.

HOME REVERSION SCHEMES

Advantages

• Home Reversion plans have no ongoing repayments to make, the reversion company makes all of its money when the property is sold.

• You know at outset what share of your home (if not its value) you will be leaving to your family.

• You continue to share in any rise in the value of your property (unless you have sold its entire value).

• You can take extra cash advances, depending on the amount you originally took.

Disadvantages

• The home reversion company will buy at a discount to the current market value.

• The big discount at which the reversion company will want to buy makes these schemes less suitable for people in their 60s. Typically, you do not receive the full market value of the share of the property you sell because the home reversion plan company will give you the absolute right to live in it rent free for the rest of your life, therefore the younger you are the longer it will take the home reversion plan company to receive their money back.

• If you die soon after taking out a plan, you could effectively have sold off your house (or a share of it) on the cheap. Some schemes give families a rebate if you die within the first few years of signing up.

• Reversion companies can be choosy about the properties they take.

Getting advice on which equity release scheme

As already said earlier it is very important to get independent financial advice on which scheme is most appropriate for your particular circumstances

Alternatives to equity release

There are many alternatives and these will be discussed with the financial adviser that gives you advice, two of the main alternatives to taking an equity release scheme are are detailed below

Sell your home and move to a property of lower value, this will free some equity that you can then use as you wish

Borrow money from your family. Rather than build up a debt against your property or sell part of it you might ask your family if they can lend or give you the money you need.

Free Guide to Equity Release Schemes

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