Equity Release - AN INSTANT Guide to the various SchemesPosted by Lohse Mcintosh on May 19th, 2021 Equity Release is the term used to describe a financial solution that's available in the UK for those who are 55 or over. The word itself covers the financial sector, with Equity Release Schemes, Lifetime Mortgages and Home Reversion Plans being the actual products that are available. The first thing to note is that equity release schemes, equity release mortgages and lifetime mortgage are all one in the same thing, with the terms used interchangeably. Each of these products refers to a financial product that releases money for homeowners aged 55 or over. The amount of money is released from the equity within their property, with the total amount being based on the property value and age the youngest applicant. The total amount which might be released starts at around 21% for those aged 55, and increases at approximately 1% yearly up to a maximum of 56% at age 90. The maximum amount available for drawdown will change between providers. Essentially all equity release schemes operate by releasing a lump sum which might be spent nevertheless, you wish. Now this can be for home improvements, to supplement ongoing pension income and state benefits, for the vacation of a lifetime, or just to assist your loved ones such as children or grandchildren. Your options available when releasing equity are either as a maximum lump sum as per the prior percentages, or as a minimum lump sum around �10,000 with the total amount being made available as an equity release drawdown facility. Equity release drawdown is normally set to the very least release of between �2000 and �2500. After you have released funds, interest is rolled up against the borrowing, generally at a set rate of interest for life. This means that you know from outset exactly how the debt will increase over time. For example a lump amount of �10,000 at a set rate of 7% will grow to �19672 after a decade, and �38697 after twenty years after the rolled up interest is put into the original borrowing. Compare Concise Finance SW15 2PG to a lump amount of say �30,000 which would grow to �59,000 over a decade at a set rate of 7%, and the benefit of equity release drawdown option is clear to see. It is worth noting that different providers offer the option to protect some of the property for all those wishing to protect a quantity for inheritance, i.e. protecting 50% of the property value. This certainly provides peace of mind, but will reduce the maximum amount which might be released from the property because the aforementioned percentages would be based on the reduction of the unprotected portion of the house. Equity Release Lifetime Mortgages can really provide a solution for all those which are asset rich but cash poor, and may make the difference between just getting by, or actually living and enjoying retirement and old age. They're not for everybody though, and obtaining advice from one of the many equity release advisers in the market is to be recommended. This will help give you an appreciation of both pros and cons associated with Equity Release. For example: - Pros You can remain living in your property for the rest of your life There are no monthly premiums to be made The debt is repaid only once the last surviving applicant passes away, the property is sold, or perhaps a move into longterm care. No negative equity guarantees make sure you can never owe more than the property is worth Cons Releasing equity make a difference entitlements to means tested benefits. As interest rolls up as time passes, the reduction in equity will make it difficult to go home, or downsize. Because the interest rolls up the amount that may be left to your beneficiaries reduces. Home Reversion Plans Unlike Lifetime Mortgages where you retain complete ownership of the property, Home Reversion Schemes focus on the basis that you may sell anything from 20% to 100% of one's property to the house Reversion Company, with any amount not sold, being held in trust. Home Reversion is only a small section of the Equity Release market, as many people view them as being poor value. With other equity release schemes you benefit from any capital growth in the house as you retain ownership, whereas once you have sold a percentage of your home to a reversion company, any increase in the value of that portion belongs to them alone. As with all financial products there is rarely an ideal solution, and so taking time to review all the information accessible to you is likely to be time wLike it? Share it! More by this author |