If you have retired and found yourself short on funds, you can choose an equity release plan to get a lump sum of money, a regular income, or both, without the need to move houses. Equity release is available for those who are fifty-five years old and above to access the money that is tied up in their home.
What is Equity Release?
Equity release is designed to help customers who are older and who either own their homes completely or have their mortgages almost entirely paid off. When you make the decision to release equity from your home, you are taking out a loan in the amount of your home’s worth knowing that you are not going to have to pay the money back to the lender. Instead, the money will be paid back when the property is sold or when the ownership of the property is transferred.
Types of Equity Release
There are two main types of equity release that you can choose from: lifetime mortgages and home reversion plans. If you select a lifetime mortgage, you can choose to either extract your money in one large lump sum or in smaller amounts over time up to the maximum limit that was agreed when the plan was initiated. You can find out how much of your home is eligible for equity release by visiting responsibleequityrelease.co.uk.
You also have the option of retaining some of the value of your property to allow for an inheritance for your loved ones. If you choose this option, you will retain full ownership of your home and have the interest fixed or rolled up. If you decide to have it rolled up, it will be paid when you die or move into a permanent long-term care home. You can also choose to make interest payments so that you can maintain the debt to the original amount of the loan before interest.
The home reversion plan allows you to access all or part of the value of the home while retaining the right to live in it, rent-free. With this option, the provider will purchase all or a percentage of your home, and you will know exactly what portion of your home you still have access to, so that you can leave that portion in a will. The percentage you retain in your home will always remain the same, regardless of what happens to the value of the home. At the end of the plan, your property is sold, and the sale proceeds are shared based on the remaining proportions of ownership.
Deciding on Equity Release
There are several different variations to equity release, and signing up for the first one you read about is often not the best idea. Equity release isn’t right for everyone. To decide if it is right for you, it is advised that you speak to a financial advisor. An advisor will be able to gather an understanding of your needs and circumstances and help you construct a personalised plan to match both your wants and your needs.