Equity release is a scheme which is specifically designed for homeowners who are above 55 years in age. If you are 55+ and own a property then you can release some of the equity & secure it against your property. One of the best things about equity release is that it provides tax-free cash which you can use to improve the quality of your life.
Due to the varying requirements for finance in retirement, current equity release schemes have been devised accordingly. The home reversion scheme is just one of the preferred schemes taken by homeowners these days.
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Home reversion scheme
This equity release scheme is designed in such a way that it allows you to sell a part of, or the whole property for an amount of money. Once you opt for this scheme then you have the right to live in your property for the remaining years of your life. This is due to the inclusion of a lifetime tenancy agreement. Although the property partly or fully belongs to reversion company, you are still allowed to live in the property until you die.
The amount of release depends upon your age and value of the property. Additionally, if you have any health issues then an impaired life home reversion scheme is available. Upon receipt of a completed medical questionnaire the lender can increase the applicants age for the purposes of re-calculating the amount of the release. The reason being that if any health issues do exist they can affect the life expectancy of the client.
The result of this being that the home reversion scheme may not have as long to run. Therefore, the reversion company can afford to release a higher amount for the same fixed percentage the applicant was prepared to sell. Alternatively, if impaired life is acknowledged by the lender, then the client could opt to to take the same tax free lump sum, but for a lower percentage ofthe property value.
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How does the lender eventually get their money back?
If you want to sell 50% of the value of your property, then your age will decide the amount of cash you will receive. Accordingly, if you die after 20 years then the lender will still get a 50% share based on the final sale value of the property.
