Lifetime
Equity Release
Those of you that have reached a certain stage in your life, either in retirement or are approaching it, are probably anticipating spending your ‘golden years’ as happily, comfortably and fruitfully as possible. However you may be finding that tax rises and underperforming pensions have reduced your savings and have limited both your independence and your options.
However, if you’re a home owner, with little or nothing to pay on your mortgage, all is far from lost. As you are probably well aware, rising house prices may have left you, on paper at least, very well off. The question is how to make your biggest asset, your house, work for you?
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One way to do this is to sell up and trade down to a smaller home, however many of us will not want to sell the property we have spent the last twenty years personalising. Therefore the alternative is to unlock some of the property’s value or equity, whilst you remain living at the premises. There are two different ways of doing this, commonly known as ‘equity release’ schemes, namely lifetime mortgages and Home Reversion Plans:
Lifetime mortgages
Whether you just want financial security, want to be able to maximise your new found leisure time or alternatively want to give the Grandchildren a helping hand, the chances are that a Lifetime Mortgage could provide the answer. Although the schemes vary, with a Lifetime Mortgage you basically borrow money secured against the value of your home; this will allow you to release a regular income or a cash lump sum out of the property. No money is paid back until you and your spouse (for joint mortgages) have died or the property ceases to be your main residence e.g. you have moved into long term care. You continue to own your home.
Home Reversion Plans
With a Home Reversion Scheme you sell your home, or a part of it, to a reversion company that allows you and your partner to continue to live there for the rest of you lives. Then after you die, the proportion of your home that was sold becomes the property of the reversion company.
So an Equity Release scheme seems an attractive proposition, but is it always suitable? As with any form of investment it should be considered with care, a lifetime mortgage will impact on both you and your family’s future. It will affect your beneficiary’s legacy and it may effect your state pension entitlement. Also many equity release products are priced less competitively than mainstream mortgages. I advise discussing the matter with your family, your solicitor and with a good professional mortgage advisor who will be able to source the best scheme and explain the ramifications of taking out such a mortgage.
Before anyone considers using their home to raise money they should ask themselves a few fundamental questions:
• Do I have the right to live in my property for life?
• Do I have freedom to move to suitable alternative property without financial penalties?
• Will the Mortgage meet my needs if I want to move or sell my home, or indeed my family to inherit it?
• Would I rather receive either a cash sum or regular income payments?
To understand the features and risks ask for a personalised illustration. There may be a fee for equity release advice, the precise amount will depend upon your circumstances but we estimate that it will be £295 initially and up to £495 payable upon completion.
For more information, please contact us