Equity release schemes enable you to convert the equity from your property into a usable cash amount. These schemes are proving helpful for many older homeowners. Some of these equity release schemes function by offering you a regular extra amount of income or a lump sum amount, or sometimes both.
While equity release schemes may look attractive, they can be complicated and difficult to understand. Thus, before opting for an equity release scheme, it is better to get legal and financial advice from industry professionals.
Two types of equity release schemes exist – home reversion and lifetime mortgages.
Home reversion schemes
A home reversion equity release scheme allows you to sell a part (or a percentage) of your property to generate the required funds. The amount of equity you get from the equity release scheme will be lower than the market value of your property. This is due to the fact you are able to live rent free for the rest of your life in your property. After you pass away, the reversion company will sell your property and get their share of the money from the sales proceedings.
Home reversion schemes are only available from the age of 65.
Lifetime mortgages let you borrow the money without any need for monthly repayment. Similar to a home reversion scheme, lifetime mortgage equity release schemes allow you to stay in your property. The amount of equity remaining will completely depend on the final value of your property and your age. The money that you borrow can either be paid to you in instalments, a lump sum amount or both.
With this equity release scheme, the lender does not own your property. The amount that you borrow must be paid off when you sell or move out of your property, or when you die.
Lifetime mortgage schemes commence at the earlier age of 55 with a maximum release available of 19% of the property value.
For advice on which scheme would be best for you, please contact the Equity Release Supermarket team on 0800 678 5159.