For many our home is our most valuable and most valued asset, however, in later life it may be desirable to access some of the capital value held in the property without having to forego the ability to live there as long as desired.
In these circumstances Equity Release can provide an effective solution.
There are two main forms of Equity Release: Home Reversion Plans and Lifetime Mortgages. Both structures enable money to be released from your home while you remain in occupation.
This is a form of long term loan which is secured against the value of your home and which becomes repayable when you cease to occupy the property, for example, on death or on entering long term care, at which time the property will be sold. Interest on the loan rolls up and is repaid along with the capital when the property is sold. The loan provider will take a charge over the property as with any other type of mortgage. The amount that will be released will depend on a number of factors including the value of your home and your age (usually you must be aged 55 or over to qualify).
One of the benefits of a Lifetime Mortgage is that you retain ownership of your home and many find this comforting, however, interest is charged on the capital lump sum as well as rolled up (cumulative) interest and the amount owing can therefore increase rapidly. Providers adhering to the Equity Release Council (formerly Safe Home Income Plans) code of conduct ensure that the amount owing will never exceed the value of the property.
Home Reversion Plan
With a Home Reversion Plan part or all of the property is sold to a specialist reversion company. You retain the right to live in the property rent free for the remainder of your life, or until you otherwise cease to occupy the property, for example, if you go into a care home.
The percentage you retain in your property remains the same and therefore you or your estate would benefit from any increase in house prices. At the end of the plan the property is sold and the proceeds distributed according to the share of ownership.The minimum age for Home Reversion Plans is usually higher than for Lifetime Mortgages.
Home Equity Release is a specialist field requiring detailed knowledge of the market place and we currently work with external experts who are able to provide the depth and breadth of experience to ensure our clients are able to make the right decision.
Further information about Later Life Planning: