Equity release refers to the various ways in which homeowners in their later years can utilize the wealth they have accrued in their property to generate income, either with a mortgage repayable on death, or by selling the property but remaining to live in it during their lifetime.
There are two main types of equity release scheme, Lifetime Mortgage and Home Reversion.
What are the key features of each scheme?
- The interest rate is fixed for the term. This is usually a higher interest rate than a conventional mortgage to compensate the lender for the delay in payment.
- The loan and interest will be secured by a mortgage over the property.
- The loan can be given in one lump sum, or portioned up and received periodically.
- It should be noted that some schemes often have significant early redemption penalties.
- Involves selling your home, or a percentage of it but still remain living in the property for the rest of your life.
- When the property is sold, the reversion company receives the proceeds from the sale, proportionate to the percentage sold to them initially.
- If only a part of the property is sold to the reversion company, you or your family will benefit from any increase in value of the part of the property you kept.
- You will not receive the full market value for the property from the reversion company due to still living in the property.
What advice do we offer on Equity Release?
There are numerous issues to consider before committing to an Equity Release scheme. We strongly recommend that you speak to an independent financial adviser. We can recommend one if you prefer.
We will ensure that you know the implications of your chosen scheme and are comfortable with proceeding.
If you would like further information, please contact us on 01904 528200 or