This enables you to access your property’s value for cash - effectively allowing you to tap into the wealth you’ve accumulated in your property without the hassle of having to move. The money released from the home can be used for almost any purpose. However, these schemes are designed to be a lifetime commitment and require careful consideration.
There are two types of equity release schemes: lifetime mortgage and home reversion plans.
This is a loan secured on your home which does not need to be repaid until you die or go into long term care.
You borrow money secured against your home – provided it is your main residence – and still retain ownership. Interest is charged on what you have borrowed which can be repaid or added to the total loan amount. When you die, or move into long term care, the home is sold and the money from the sale is used to pay off the loan. The remainder can go to your beneficiaries. If there is not enough money left from the sale, a no-negative equity guarantee now ensures that you will never have to pay back more than the value of your home.
With a home reversion you sell all or a part of your home in return for a cash lump sum, a regular income or both. The part of your home that you sell now belongs to someone else but you are allowed to carry on living in it rent free until you die or move out.
- You need to be over 55
- It can be more expensive compared to an ordinary mortgage
- Releasing equity from your property may mean you can’t rely on the equity in your property at a later date, possibly for use for retirement or long term care
- Money received from equity release might affect your entitlement to state benefits
- Less for you to pass on to your family as an inheritance
- Arrangement fees will need to be paid
Before using equity release we recommend that you seek professional advice: please contact our team of qualified specialists.