Equity release schemes are a great option if you are looking for an alternative way to gain cash. Retired individuals may find it difficult to live a comfortable life due to rising costs. Equity release schemes benefit those who are asset rich but cash poor.
There are two main types of equity release plans – lifetime mortgages and home reversion plans.
Lifetime mortgages are plans where you get a secured loan on your property with no monthly interest payments. The loan amount can be either taken as a lump sum or as monthly instalments. Lifetime mortgages have become popular over the past few years and this has encouraged many equity release providers to come up with variations on the scheme known as drawdown plans.
A drawdown plan allows you to release cash when you need it instead of taking the entire lump sum or regular monthly payments. This means that you will pay less interest over the longer term than if you took the whole amount as one release at the outset.
Home reversion plans
With home reversion plans, you can sell either part or all of your property to the equity release provider. You are not liable to pay any taxes for the amount received and you also get an assured lifetime lease with no monthly instalments to pay.
Even after you have sold off your property, you get to stay in your house rent free for a time period that you choose.
The older you are, the larger amount you can raise from a home reversion plan. Thus, age can be an important factor when going for this scheme.