Posts Tagged ‘equity release schemes’
Friday, March 4th, 2011
Equity release is a type of mortgage which is secured on your property and helps you to access money attached to it. The value of your property minus any secured loans placed upon it is termed as equity. You are able to withdraw this amount to assist you financially in later years.
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What is equity release all about?
A clichéd reason given for releasing equity is mainly ‘debt consolidation’. During 2011, debt consolidation is proving to be the most popular reason for releasing equity from one’s property.
Debt consolidation involves settling mortgages, loans, credit cards & any other unsecured finance which the individual is finding difficult to maintain. Once these debts are repaid, your monthly expenditure is reduced thus giving you extra income to enjoy. Other reasons for releasing equity could be to buy a new car, holidays or generally making your lifestyle more satisfactory during retirement.
The equity release plans do not have a fixed term therefore they run for the rest of your own or your partner’s life. If there is any money left, it is passed onto your nominees as suggested in your will. This scheme is only meant for people who have retired and are over 55 years of age.
There are two types of equity release scheme. The lifetime mortgage scheme is recommended for people who are retired. A loan is given to the borrowers on their house. Interest is then added annually to the loan, which is then repaid by selling the property when the borrower dies or when they move out into long term care.
The second option is a home reversion scheme & refers to selling the whole or part of your property to the reversion provider. This means that it the property itself is actually shared or even fully belongs to someone else. The borrowers can continue to live in their house for as long as they wish & not have to worry about any rental payments.
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To ascertain which equity release scheme is suitable for yourself, contact the Equity Release Supermarket team on 0800 783 9652 or visit our market leading website at EquityReleaseSupermarket.co.uk
Tags: equity release, equity release schemes, home reversion, home reversion schemes
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Wednesday, February 16th, 2011
The main concern of equity release schemes is the reduced inheritance which is passed down to beneficiaries. Here we discuss the pro’s & con’s of roll-up equity release plans.
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First, let’s look at the effect on the beneficiaries & the source of the causes for concern. This then leads us to the equity release calculator with facts & figures showing how these schemes fair for the beneficiaries on final redemption of the plan.
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Ok, we’ve have all heard the saying; bad news travels faster than good news & this is synonymous with terminology ‘equity release’.
Although equity release plans were initiated in 1965, the news damaging these schemes generally dates back to the late 1980’s when the first home income plans were launched.
Linked to an annuities or regular income investment bonds & an interest only mortgage, plans such as these were destined to fail, relying heavily on investment performance in a period of falling property values & rapidly rising interest rates.
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The mid 90’s then introduced the much derided & chastened Shared Appreciation Mortgages (SAM’s), the focus of most causes for campaigns against equity release including Trevor MacDonald’s Tonight TV programme.
Therefore, its no wonder the industries reputation was soured.
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So what has the equity release industry done about repairing this negative sentiment?
At the time of the SAM’s debacle, SHIP (Safe Home Income Plans) was launched. Formed from its originators – Ecclesiastical Life, Hodge Equity Release, Home & Capital Trust & GE Life all members agreed to abide by a strict code of conduct, which still exists today.
Soon new lenders entered the equity release market, with household names such as Norwich Union & Northern Rock with their newly developed roll-up equity release schemes bringing a significant boost & trust to the industry.
Although equity release schemes began to blossom around 2003 with approximately 25,000 equity release loans completed, a lack of regulation still overshadowed the equity release sector. The market was still somewhat bighted by the previous misdemeanours.
Thankfully, partial regulation was soon imposed on the equity release industry with lifetime mortgages coming under the auspices of the Financial Services Authority on 31st October 2004. Home reversions soon joined lifetime mortgage schemes & by 2007 full regulation & confidence was brought back to the equity release marketplace.
Therefore, the market has evolved & strived to restore pride; a far cry from the negative perceptions of decades ago.
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So what does this all mean for today’s beneficiaries?
The main ‘clean up act’ came with the introduction of SHIP & its rules imposed on the members. The ‘no negative equity guarantee’ affords the greatest level of protection the industry has to offer.
Safe in the knowledge that any amount borrowed by their parents can never escalate to more than the eventual sale price of the property, they are at least guaranteed no debt can be passed onto themselves.
A crumb of comfort maybe, but certainly peace of mind for parents.
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As an equity release adviser, encouragement must always be shown to involve the heirs to the estate. With their input & assurance, feelings can then be vented either for or against equity release being taken as for many this is a major financial proposition.
Again qualified advisers should play an important role in explaining the pro’s & con’s of equity release mortgages & convey these issues to all parties concerned.
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What else does the equity release sector afford by way of protection?
Interest rates for home equity release schemes, albeit not the lowest ever, are still historically low. One positive feature of these schemes is the lifetime fixed rate on all equity release loans now.
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So what is the benefit of this?
If you borrowed an amount of capital, with a fixed interest rate for life it enables you to calculate the exact future balance.
This is building further reassurance for potential equity release applicants.
We know the equity release balance escalates over the lifetime of the scheme; this is the nature of plans & should never be entered into unless this has been clearly explained. The effect of the interest compounding annually, approximately doubles the balance every 10-11 years, depending on interest rate charged by the equity release companies.
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Sounds daunting? Well, let’s now look at the sums as promised earlier:
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One of the lowest interest rates around at present would be the Aviva Lifetime Lump Sum scheme, which currently has a fixed interest rate of 6.65% (6.9% APR) annual.
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A male, aged 65 borrowing a lump sum of £25,000 on the 6.65% Aviva Lifestyle lump sum would know exactly what the future balance will be, even before taking out the equity release scheme. The Key Facts Illustration provided by the equity release adviser will confirm these figures & also the costs & additional features involved.
For instance, based on a release of £25,000 in this scenario would lead to a balance in 10 years of £47,594 & after 20 years would be £90,606.
This may seem expensive given only £25,000 was borrowed initially; however there are two factors that could still rule in the equity releases favour.
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One common issue overlooked is the potential for property prices to increase. If so, & with 100% ownership of the house still retained the homeowner will fully benefit from any future escalation in the house price. This will then offset some of the compounding effect of the interest & mitigate its effect on the overall estate. Again, we are looking longer term & no guarantee can be given prices will go up; nevertheless historical data confirms they still have.
As a consequence, a rule of thumb is never to borrow anymore than required beyond the initial 12 months. Plans are now flexible enough with drawdown schemes being available that funds can even be drip fed over time as & when required.
hence, by taking a lower initial amount would result in less interest being charged, meaning more inheritance passed to the beneficiaries.
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The second factor affecting the balance accruing & is the main cause of equity release roll-up is purely down the fact that NO monthly payments are required. This helps retirees to have access to the equity tied up in their property & at the same time leave their budget unaffected.
Nevertheless, equity release schemes do have an increasing role in retirement planning for the over 55’s. Care must always be taken & never rushed into without discussion & involvement of third parties.
Advice should always be provided by an industry qualified equity release consultant. If so, & in the right circumstances equity release can provide a comfortable & enjoyable retirement.
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Finally, hopefully lessons have been learned from the past & the industry can move forward, innovate & develop further over time.
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To discuss any of these issues & with no obligation whatsoever, please contact the Equity Release Supermarket team on 0800 783 9652 or email mark@equityrelease supermarket.co.uk
Tags: drawdown equity release, equity release, Equity Release Adviser, equity release awards, Equity release calculator, equity release schemes, lifetime mortgages, No negative equity guarantee
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Friday, February 11th, 2011
The resurgence of the equity release market gathers momentum in 2011 with the news that New Life Mortgages are set to re-introduce their landlord & second home equity release schemes on 11th February 2011.
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Following the additions of more2life & New Life Mortgages to the equity release market late in 2010, the latest launch from the innovative lifetime mortgage lender signals a degree of diversity to their portfolio.
New Life Mortgages temporarily withdrew from equity release market in 2009. They obviously haven’t been sat idle, but instead waited for their opportunity to re-enter at the right time & with the right products.
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Following on from my previous article on New Life Mortgages rejoining the equity release market in November 2010, here we discuss the features & benefits to landlords of this unique equity release plan.
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How does the scheme work?
The New Life Mortgages Landlord Loan provides a tax free cash lump sum based on a percentage of the value of the residential investment property & the age of the applicant. Plans start at age 55 & any landlord with a portfolio of upto 5 rental properties can potentially release some of the equity tied up within them.
This buy to let equity release has no set repayment date & no monthly repayments to make. The loan is eventually repayable on the sale of the property when the last surviving borrower has died or gone into care.
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How do I qualify?
- Minimum age of 55 (for joint applicants minimum age 55 of the youngest)
- Investment property must be in England & Wales
- Landlord loan minimum property valuation of £100,000 & a maximum of £1million
- Minimum release is £25,000 & maximum is £500,000
- The property should be standard construction with flats over 5 storeys excluded
- If leasehold property, then 80 years must be remaining on the lease
- Any existing mortgage must be repaid on commencement of the Landlord scheme
How Much Can I Borrow?
This is determined by the age of the youngest applicant & the value of the investment properties:-
- Age 55 – 16%
- Age 60 – 21%
- Age 65 - 26%
- Age 70 - 31%
- Age 75 – 36%
- Age 80 – 41%
- Age 85+ – 45%
Therefore, as an example a 65 year old landlord with a single investment property of £200,000 could potentially release a capital lump sum of £52,000.
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How does it compare to a normal equity release scheme?
The scheme in principle works exactly the same. You borrow the money, the interest accrues on a monthly basis & it is repaid when the property is finally sold.
The differences lie in the rental side; an assured shorthold tenancy agreement must be in place to qualify & cannot be let to family members.
Also, there are maximum borrowing criteria, similar to a buy to let mortgage. This states that the monthly interest charged cannot be more than the rental income received.
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What are the costs involved?
- Valuation fee dependent upon the value of the investment property
- Application fee which can be added to the loan
- Solicitors legal fees
- Lifetime fixed monthly interest rates of 6.39% (age 55-80) & 6.55% (age 81+)
- Early repayment charges only 5% for the first 5 years. No charges thereafter.
- Any advice fee charged by your equity release specialist
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Practical uses of the New Life Landlord buy to let mortgage?
The equity release funds can be utilised in many ways.
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With market opportunities growing in the rental market as house prices fall & yields increase, bargains are there to be had. Should any residential landlord wish to expand their portfolio & have concerns over the expense of buy to let mortgages they can consider schemes such as this.
Should a potential landlord spot a new investment opportunity, but has limited capital for deposit, then landlord equity release schemes could assist. The borrower could review all properties under his portfolio & by using an equity release calculator; assess how much could be released individually to meet the shortfall required.
Additionally, with the age group eligible for this buy to let mortgage there could be tax implications. Therefore, should some of these assets need to be disposed of, rather than selling the property & incurring capital gains tax, then equity release can be undertaken instead.
Finally & the most common purpose for this could be for debt consolidation purposes. Should financial difficulties arise on a buy to let mortgage or other personal finances, then subject to the amount that can be released, these debts can be repaid.
Perhaps one has just had enough repaying a buy to let mortgage & would rather receive the gross rental income to support their retirement?
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The uses of the New Life Landlord scheme can be many; so to discuss how the features of this unique buy to let lifetime mortgage can benefit you contact the Equity Release Supermarket team on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk.
Tags: buy to let, buy to let mortgage, equity release, Equity release calculator, equity release schemes, landlord equity release, landlord mortgages, New Life Mortgages
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Saturday, December 25th, 2010
Do you need to unlock money from your property?
If yes, then equity release schemes could be the ideal solution for you. The best thing about these schemes is that they allow you to stay in your home even afterward you have released the equity.
Unlike other loans, the money which you receive through equity release is tax-free in nature & means that you can spend the cash in whichever way you want. Another difference between loans & equity release schemes are that loans have monthly repayments to make. With an equity release scheme you have NO monthly payments whatsoever.
Finally, a loan will always have a fixed term over which the loan must be repaid. However, equity release schemes has no repayment period from the outset as it only needs repayment once the property is sold.
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How to qualify for equity release schemes?
Today, there are various financial institutions which provide equity release schemes. If you want to opt for equity release then you have to meet the criteria. First of all, you have to be over 55 with no maximum age and you must own a home which is worth £60,000 or more. The property should be mortgage free, or with a mortgage balance that can be easily repaid with the release of equity from the property. Therefore, the balance should be below the borrowing threshold that the equity release schemes provide.
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Types of equity release schemes
To fulfill many financial requirements, two different kinds of equity release schemes have been introduced onto the market. This includes lifetime mortgages and home reversion plans. Nowadays, many homeowners prefer lifetime mortgages because the repayment is done after the death of the applicants. Home reversion plans allow you to sell all or a part of your property, but have the advantage of guaranteeing an inheritance for your beneficiaries.
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How equity release schemes are regulated
The Financial Services Authority (FSA) takes care of various regulations related to equity release companies & schemes. Additionally, the equity release adviser should also be regulated by the FSA & can be checked on the FSA register which is on the FSA website. Moreover, within the equity release industry a trade body has been formed named SHIP (Safe Home Income Plan) & was formed in 1991. This SHIP organisation regulates all the equity release schemes offered by different financial institutions in the UK & liaises with the government on regulation changes & amendments to the equity release marketplace.
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If you have any equity release questions relating to whether equity release can benefit you then please call our friendly adviser team on 0800 678 5159.
Alternatively email mark@equityreleasesupermarket.co.uk
Tags: equity release, Equity Release Adviser, equity release schemes, FSA, FSA register, home reversion plans
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Friday, December 24th, 2010
Equity release schemes can be beneficial for those retired individuals who suit the old adage where ‘asset rich but cash poor‘ features in so many circumstances.
Throughout one’s life we have many financial demands to fulfil including buying that first house, holidays, bringing up the children & financing through school then university. There’s the ongoing home improvements, weddings & christenings & then the when you think its time to look after no 1, there’s the grandchildren!
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It would seem that personal finances never get chance to take a breather!
However, this is all well & good whilst in continuous employment, as these expenditures can be funded out of regular income.
But how can one maintain these ongoing costs once retirement is reached? Many people do not realise or make enough financial provision via pensions or alternative retirement funding schemes as to how much money will be required to fund the remainder of their years. Afterall retirement is effectively the longest holiday of your life.
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We all know how much we spend on a short break holiday; consider how much this is likely to cost should this holiday last 20 years!
Average life expectancy has increased significantly over the last few decades, so as we live longer the greater the financial pension fund that is required. So can one really expect to be able to meet the financial needs of forthcoming retirement years? If so how can one fulfil this?
With lenders being few & far between in their numbers post retirement, how does one meet the potential shortfall that will inevitably exist for most of state pension age?
Well for the typical retiree, who has experience all the aforementioned lifestyle issues then equity release potentially could lead you into a financially secure future.
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There are two main types of equity release schemes – lifetime mortgages and home reversion plans. Of these this article concentrates on lifetime mortgage schemes
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Lifetime mortgages
Lifetime mortgages are special kinds of mortgage plans that are beneficial to individuals who are over 55 (for joint applicants, both should be more than 55 years of age). This is the most popular form of equity release & accounts for almost 90% of all equity release plans taken out. The reason is their flexibility & the fact the property will always remain 100% in your own name. This is important for many people whom have worked hard to build up towards their greatest asset, their home.
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With a lifetime mortgage, you get a secured loan which you can either take as an initial lump sum or ad-hoc withdrawals in the future whenever they are required. Interest accumulated on the loan will be rolled up over your lifetime until death or moving into long term care. At that point the property is sold off by the executors of the estate which they have between 6-12 months to complete this process of paying the redemption figure back to the equity release company.
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Advantages
Lifetime mortgages do not require you to make any monthly payments unlike other mortgage schemes. You can spend your money the way you want & be flexible in the withdrawal of the tax free cash. This is facilitated by the equity release drawdown plan that enables you to take cash lump sums from a reserve facility as & when its required.
The main advantage of drawdown is that you are only charged interest on the amount actually taken. Hence, whilst money is still sat in reserve with the equity release lender, you are not charged interest on this portion. This removes the necessity to take a large initial lump sum & have it languishing in the bank or building society at an interest rate that is lower than that being charged by the equity release plan itself.
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If any of the issues above feel of relevance to you, feel free to give the Equity Release Supermarket team a call to discuss the ways in which equity release could may be assist your retirement.
t: 0800 678 5159
e: mark@equityreleasesupermarket.co.uk
w: http://www.equityreleasesupermarket.co.uk
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Tags: drawdown equity release, equity release, equity release schemes, income, retirement
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Thursday, December 23rd, 2010
Equity release schemes allow aged homeowners to get some amount of cash against the value of their property. If you are facing financial problems and your pension is not enough then equity release is a perfect solution for you. By opting for equity release, you can convert the value of your property into cash.
The amount which you can get for your property will be based on your age, the current market value of your home minus outstanding debts.
To qualify for equity release schemes, you have to fulfill certain requirements such as:
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• The youngest homeowner should be over 55
• The value of the property must be £60,000 or more
• You should have no or very little in the way of outstanding loans on the property
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If you have decided to go for equity release then you must consider the types such as home reversion plans and lifetime mortgages. Under both schemes, you can release some amount of money and continue living in the property for the rest of your life.
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Additional benefits of home equity release schemes
Once you have applied for equity release then you can either get a lump sum of money or regular income. The best thing about this money is that it is tax-free. There are many people who buy a second home, a car, repay outstanding debts or go on holiday. Improve your retirement and live frugally with equity release schemes.
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Ring 0800 678 5159 today to receive your free initial consultation from an equity release expert.
Tags: equity release, equity release expert, equity release schemes, financial difficulties, home reversion
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Tuesday, December 21st, 2010
If you want to release some money against the value of your property then equity release schemes can be ideal options for you. At present, many people after retirement opt for equity release to improve their income or make lifestyle purchases. Here we look at the features & minimum specifications of these schemes.
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What qualifications are required for equity release?
As equity release schemes are specially designed for retired individuals, you must be over 55 years of age to apply. It is necessary to own a home which is generally worth more than £60,000. This is the minimum acceptable property valuation on any equity release plan in the marketplace & is offered by New Life Mortgages.
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All equity release schemes, prior to inception will require the mortgage or any other secured loan upon it to be repaid either before, or at completion. Therefore, it is essential that the mortgage is low or at least below the maximum equity release possible. Thus, if a high mortgage balance exists it may not be possible to complete an equity release scheme. This means that you should have very little or no mortgage at all to enjoy the benefits of equity release schemes.
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What benefits are offered by equity release schemes?
One of the best things about these schemes is that they will offer tax-free cash. This means that you can spend the money in different ways. For instance, you can buy a new car, a new home, pay off outstanding debts or go on holiday.
Unlike bank loans, equity release schemes allow you to stay in your home with no monthly repayments and also enjoy the cash. Today, various equity release loans have been introduced, so you can choose the one which suits your needs. However, as always we suggest that you always receive independent financial advice to ensure that the correct scheme is recommended to suit your requirements.
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To ensure you receive upto date advice on the best deals & current offers available ring the Equity Release Supermarket team on freephone 0800 678 5159 or email mark@equityreleasesupermarket.co.uk with your query.
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Tags: equity release, equity release schemes, Equity Release Supermarket, independent financial advice, New Life Mortgages
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Monday, December 20th, 2010
Should you have already purchased your annuity from your pension scheme, then unless it is indexed linked by inflation you may now be feeling that has lost some of its purchasing power over the years. With inflationary fears currently still persisting, even with the recent downturn in the UK economy, then people are looking at extra ways to enhance their retirement income & lifestyle.
Obviously, once a pension has been purchased then it is fixed for life, so alternative sources of boosting one’s retirement income need to be sourced.
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So how can equity release assist?
Equity release allows you to enjoy the monetary benefits of your assets without having to sell them. This is one of the ways to use the equity locked in your property. Equity release schemes are available only for retired individuals over the age of 55.
There are two types of equity release schemes: Lifetime mortgages and home reversion schemes. Consider the benefits of these two and choose one that suits your requirements. It is prudent to opt for independent financial advice when dealing with equity release schemes.
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Lifetime mortgage schemes: These schemes are designed for property owners. They help in gaining money by mortgaging the property. A major benefit of opting for this scheme is that you still remain the sole owner of your property. Individuals over 55 years of age are eligible for lifetime mortgage schemes.
One type of lifetime mortgage scheme called drawdown equity release could be a solution here. The lender will calculate an overall maximum that can be released & from this the applicant can withdraw this reserve facility in small amounts at times to suit one’s requirements. This could be monthly, half yearly or even annually, but the choice is yours. Therefore, by opting for a drawdown scheme could boost your retirement finances with flexibility.
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Reversion schemes: Contrary to lifetime mortgage schemes, home reversion schemes require you to sell a part or all of your property to enjoy monetary benefits. A lump sum from one of these schemes can be used to purchase an annuity which could therefore supplement any existing pension scheme.
Dependent on the lump sum raised, age & health & options built into the annuity would determine the regular income to be paid by the annuity provider. Always shop around or seek the advice of an independent financial adviser to ensure the maximum possible income is achieved.
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Eligibility
You should be the sole owner of your property prior to mortgaging it. The aforementioned schemes have different age requirements. While lifetime mortgage schemes require an individual to be 55 years of age, home reversion schemes need the individual to be 65 years of age to qualify. Your property will be surveyed and you can qualify for these schemes only if it is worth £60,000 or more.
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Equity Release Supermarket have independent financial advisers that can provide advice on both equity release & how to maximise your retirement income with annuities & pensions.
Contact us on freephone 0800 678 5159 if you wish to discuss whether any of these products can help your retirement financially.
e: mark@equityreleasesupermarket.co.uk
w: http://www.equityreleasesupermarket.co.uk
Tags: drawdown, equity release, equity release schemes, home reversion, home reversion schemes, lifetime mortgage schemes, lifetime mortgages, pension annuity, purchased life annuity
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Friday, December 17th, 2010
Equity release schemes are designed to financially secure retired individuals standard of living in their golden years. Any individual who is over 55 years of age and owns a home can reap the benefits of these schemes. Equity release schemes allow the owner to acquire tax free cash for their assets. The reason behind the rapid growth of equity release schemes is the unique features and benefits they offer to the user.
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A few features are listed below:
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The only loan where the user does not have to think of repayment
Equity release schemes do not force you to repay the loan. These schemes let you enjoy the amount you receive from your assets for life. The payment of the loan is done by the executor of the scheme after death or moving into long term care. It is also the executor of the scheme that will be responsible for the sale of the property & dependent upon which scheme was selected at the outset, will determined what timescales repayment of the mortgage needs to be repaid back to the providers.
This period can be anywhere between 6-12 months from the deceased passing away. This will be in accordance per the mutually agreed terms and conditions of the mortgage agreement.
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Things you should know about equity release
The very first thing one should know about this scheme is that you must be be the owner of the property & it must be your main residence. One cannot let the property and use it to gain cash from an equity release scheme. If you are the owner and are planning to opt for this scheme then see to it that your property is in good condition too.
During the application process the property will be valued & surveyed so that the value can be ascertained. This figure will form the basis of the mortgage offer & lending conditions. If the lender feels the property requires any maintenance, they can stipulate that any essential repairs are carried out BEFORE the cash is released. This will be decided on a case by case basis & can also vary between the equity release lenders.
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That you lose the rights on your property is the biggest myth. On lifetime mortgage schemes the person still owns the property and has full rights over it.
Given my 10 years experience of advising on equity release, I have only ever known 2 cases ever be declined; one for subsidence which still could have been put right & the other was a house in total disrepair. Nevertheless, upon re-application with Godiva, this case was subsequently accepted!
Therefore, there is not a single rule across the range of equity release companies & therefore it can be your experienced equity release adviser that can make the difference between getting accepted or declined.
For this reason you should always seek the services of an experienced independent equity release adviser such as Equity Release Supermarket who have over 50 years combined equity release service.
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Call freephone 0800 678 5159 today & talk with no obligation to your friendly equity release advisor.
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Tags: equity release, equity release advisers, equity release companies, equity release schemes
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Thursday, December 16th, 2010
Before entering into for equity release, you need to be well versed with this financial product. Below are answers to some common questions that might make your task easier such as what is equity release.
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What is equity release?
Equity release schemes help retired individuals to raise money from their property. Firstly, the term ‘equity’ describes the net value of your property. This is calculated by taking the current sale value of the property & deducting any mortgage or secured loans upon it.
The money raised is this equity tied up in the property. This money can either be withdrawn as a lump sum or in monthly instalments, the popular of which is primarily the former. A main feature of these equity release schemes is that you do not have to move out of your house and allows you to live your life in peace and financial comfort.
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What are the uses of equity release plans?
The tax free lump sum released is yours to spend as you wish. The equity release companies do not place any restrictions on how the money is spent. You can make use of the released cash to supplement your retirement income and clear debts including mortgages, loans, credit cards, hire purchase & catalogues.
Apart from this, you could also use the money to go on holidays, redesign your home, purchase new car or increasingly an popular reason which is to help children invest in bricks & mortar or get on the property ladder for the first time.
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What are the types of schemes available?
Equity release schemes broadly fall into two categories – lifetime mortgages and home reversion plans.
With lifetime mortgages, you get a secured loan on the property. You do not have to make any monthly interest payments. Instead, the interest gets rolled up and is paid off when the property is sold. This would be on death of the last survivor or moving into long term care. Therefore, you can continue to live in your home for the rest of your life or until the time you move into a retirement or care home. The main difference between the roll-up lifetime mortgage scheme & the home reversion is that with the former, the property remains 100% in the name of the property owner.
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With home reversion plans, you can sell a part or all of your property to the lender in return for a lump sum. The home reversion providers will therefore take partial ownership of your property to the extent of the percentage sold.
A lifetime tenancy is created so you can live rent free in the property for the remainder of your life. This are great equity release solutions for those who wish to guarantee an inheritance for their children & beneficiaries.
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Why is life expectancy important?
The type of scheme chosen by you will depend on how long you are likely to stay in your house. The older you are, the more tax free cash you can raise.
With a lifetime mortgage scheme, the longer you live the greater the final balance will be. This is due to the roll-up & compounding effect of the interest on a year on year basis. Therefore, there you cannot predict how much equity will be left at the end of the day as you do not know long the plan will roll-up for.
On the 0 hand the advantage of home reversion schemes are that you can guarantee an inheritance for your beneficiaries. The reason for this is due to the fact that if a percentage of the property is sold, then the remaining percentage is yours to keep. Consequently, the estate will retain this percentage of the final sale value of the property & can guarantee an inheritance to pass down.
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Not sure which scheme is best for your circumstances? Why not call the Equity Release Supermarket team on freephone 0800 678 5159 or email mark@equityreleasesupermarket.
We look forward to hearing from you.
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Author
Mark Gregory CeMap CeRER
Tags: equity release, equity release companies, equity release schemes, home reversion, home reversion schemes, lifetime mortgages
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