Equity ReleaseReleasing the equity in your home to obtain a lump sum of cash that you can use for anything you need is a great way to afford a dream holiday, new car or pay for home improvements. It can be difficult to know whether equity release is right for you, but take a few minutes to read our handy guide and you will soon know whether it is something you should take advantage of this year.
There are many benefits to taking advantage of equity release, and it’s now an important part of retirement funding for many people across the UK. You can choose to release some of the funds available in your home to pay for any of the following:
• Paying off a mortgage;
• Topping up retirement income;
• Home improvements;
• A dream holiday;
• A new car.
Two Types of Scheme
The two different types of scheme are lifetime mortgages and home reversion plans. Here’s a quick guide to the pros and cons of each.
• Lifetime Mortgages – a new loan is secured on your home, although you don’t need to make any payments - instead, interest is gathered which is due to be paid when the scheme ends. Normally once you and your partner move into care or die,your home is sold and the funds used to pay off the accrued interest. Obviously, the downside to this is that interest can quickly mount up and the inheritance your family receive will be reduced – the amount of interest charged also remains the same whether property prices rise or fall. Because no interest is payable whilst you are alive, a lifetime mortgage is a practical and affordable option for anyone over the age of 55.
• Home Reversion Plans – either part or all of your home is sold through this scheme although you continue to live there. After your death, your home is sold and funds split between your estate and the home reversion provider. You can opt for a lump sum or a fixed monthly income payment. This scheme is popular as you know what you’ll be leaving for your family and may be able to get a bigger payment if you’re suffering from a serious illness. However, your home will be purchased by the home reversion provider at a price which is lower than its current market value and not all home reversion providers accept all types of homes.
Whilst home equity release scheme are regulated by the FCA, its best to seek independent legal and financial advice before signing up for any scheme – an independent financial adviser will be able to advise you if there is a better way to release cash for your dream holiday than an equity release scheme. You can use online equity release calculator to see what are the premiums and compare mortgage rates from few providers.
Keyrs offer research of the UK market on equity release and based on your details will offer you with good retirement solutions. The initial consultation is completely free.
Age Partnership gives you the option to calculate how much equity you can expect to release from your property.
Aviva have more than 15 years’ experience providing equity release products to people across the UK and their Lifestyle flexi plan can be tailored to suit individual needs.
Liverpool Victoria offer flexible lifetime mortgage schemes at competitive rates.
Hodge Lifetime is a popular lifetime mortgage provider which is a subsidiary of Julian Hodge Bank – they have been offering equity schemes since 1965 and have a reputation for reliability.
You may also want to read about: Conveyancing