In its simplest terms, Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration.
You need to be 55+ to access an later life lending scheme and as a rule, you can take the money in one lump sum, or several smaller amounts on which you pay the interest. It is crucial that you have access to the right advice when considering later life lending.
This article gives a summary of later life lending options, lifetime mortgages, and the home reversion scheme.
One of our team will be happy to provide any advice on Lifetime Mortgages and guidance if you would like any more information about either of these schemes, however, for the Home Reversion Scheme, we act as introducers only.
Lifetime Mortgages
A lifetime mortgage is a mortgage that is secured against your home. This allows you to release a cash lump sum from the equity you have available. The benefit of a lifetime mortgage is that you maintain ownership of your home and benefit from any price increases.
Under a lifetime mortgage, you have different options on how you want to structure the finance. These are:
Roll Up
With this option, you receive a cash sum with no monthly payments. The cash sum and any interest is paid off by the sale of your home when you die or move into long-term care.
Drawdown
This is a flexible option where you can access cash as and when you need it and interest is only charged on the amount you have taken. This is helpful where you may need more money in the future as it means you will not need to pay interest on a lump sum you have not released.
Flexible
Under this option, you can choose to make voluntary payments to bring down your loan amount.
Enhanced
This option is only available for those with certain medical conditions. Under an enhanced later life lending option, you could unlock even more cash and qualify for a better interest rate.
Interest-only
This option is a little bit like an interest-only mortgage when you are purchasing a property as it enabled you to access a cash lump from your home and then pay off a certain amount of interest monthly as opposed to rolling it up over time.
This helps reduce the amount needing to be paid back from the sale of your home when you pass away.
Home Reversion Scheme
This scheme involves selling either part or all of your home to a home reversion plan partner for a cash lump sum.
The size of sum you can raise from this tends to be higher than that which you can raise from a lifetime mortgage and while all or part of your home will belong to someone else, you can live there rent-free for the rest of your life.
One point to highlight is that whilst a home reversion scheme is not a loan, you only benefit from the increase in value of the proportion of the property that you still own.
It is important to get the right advice when considering later life lending. Our team is on hand to offer advice and guidance and you can either call us on 01322 553282 or contact us online.