Although there a number of ways of raising money on your property, perhaps through arranging a conventional mortgage or through down-sizing, you might want to consider using one of the Equity Release options. These are the Lifetime Mortgage or Home Reversion Plans. So here are a few of the main features of these plans.
Lifetime Mortgage. This is the most common equity Release plan and is available for clients aged 55 onwards.
- You can release funds in a lump-sum or by taking a lower initial sum and then using a a ‘reserve’ or ‘draw-down’ feature
- With some schemes, you have the option of making monthly or ad-hoc payments.
- You continue to own your property and can live in the home for the rest of your lives and if set up as a couple, the loan is repaid when the second person leaves the property.
- The loan plus the interest, which is ‘rolled-up’ or ‘compound’ interest is repaid from the sale of your home
- The inheritance you pass on to beneficiaries may be reduced
- There may be a restriction on the types of property you wish to move to should you downsize in the future
Home Reversion schemes, These are usually aimed at older client and unavailable for clients under age 65.
- You release the money in your property by selling part or all of your home
- The percentage you retain in the property always remains the same unless you decided to take additional funds.
- Under specific conditions should as for much older clients, Home Reversion plans may release more capital than Lifetime Mortgages.
- A home reversion is not a loan so interest isn’t added
- You are no longer the sole owner of the property
- You are unlikely to receive the full market value of the property
- Again, the inheritance you pass on to beneficiaries may be reduced
So which one is for you? Both schemes provide additional capital but it is important that before making a decision that you discuss your options with a suitably qualified adviser who will take into consideration your personal circumstances and your intended goals.