Equity release allows you to release funds from your home when it is needed the most. It is important to consider speaking to your family if you are thinking of raising money on your property via equity release as your loved ones’ future inheritance could be affected.
If you are aged 50 or over and have little savings you may want to raise money from your home to enjoy your retirement, this may include having money for holidays, home improvements or to have a better standard of living. You can live in the property until you either pass away or you move into long term care, this is when the property will be sold and the mortgage repaid.
There are two types of equity release schemes available; these are Lifetime mortgages or Home Reversion plans. Both plans can provide you with a cash lump sum, a monthly income or both if needed. Equity release may prove more costly than other forms of secured lending.
A Life time mortgage is the most common type of equity release plan. The older you are the more you can normally borrow. Lifetime mortgages are secured against your property’s worth. A lifetime mortgage can include a no negative equity guarantee which means you will never owe more than your property is worth. You do not need to make a monthly mortgage payment, the mortgage amount and accrued interest are paid back when you either pass away or move into long term care.
Home Reversion Schemes
With a home reversion scheme, you raise the funds you require by selling a percentage of your home’s value. You can normally sell between 25% to 100% of your properties value. You have an obligation to keep your home in a state of good repair. The property is sold upon death and proceeds distributed in accordance with the remaining proportions of ownership.
Equity release may involve a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration.
Equity release may not be right for everyone. It may affect your entitlement to state benefits and will reduce the value of your estate.
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