You may have started to think about how you will manage financially in the future and, if you own your home and have little or no mortgage, you may be considering equity release as a way to boost your finances.
Equity release allows you to borrow money against the value of your home but pay back nothing until your home is sold – either after your death or if you go into a care home. It is vital to take independent financial advice before signing up to an equity release scheme to ensure you are aware of all the possibilities and implications of the scheme.
We can help you to decide whether equity release is right for you. We will explain the different types of equity release, how to avoid risk and how to obtain legal advice before deciding whether or not to join an equity release scheme.
Equity release can be in one of two forms, either a lifetime mortgage or a reversion scheme.
Lifetime mortgages involve the taking out of a mortgage secured against the value of your home. You don’t make any monthly repayments and the interest on the mortgage is ‘rolled up’ over the life of the loan. Once you enter long-term care, or upon your death, the property is sold and the money owed to the mortgage lender is repaid.
There are two main forms of lifetime mortgages – fixed interest or capped interest. With both forms, the size of the loan can increase as interest is added over time. Sometimes this can mean that the size of the mortgage can be greater than the value of your home. However, schemes provided by members of the Equity Release Council (formerly SHIP), offer a no-negative-equity guarantee to make sure that this doesn’t happen.
A reversion scheme involves selling a percentage of your property to a reversion company for a fixed amount.
Through a reversion scheme, homeowners receive a certain amount of the value of the property sold, depending on their age. When the property is sold, the reversion company receives the same percentage of the sales proceeds originally borrowed against the value of the home.
Reversion schemes are the traditional form of equity release and may be more suitable for you than a lifetime mortgage if you are looking to release a relatively small amount from the value of your home.
We can advise on the best equity release arrangement suited to your needs, as well as advising on the features and risks involved. Contact us today to arrange a free initial, no obligation appointment.
Your home may be repossessed if you do not keep up repayments on your mortgage.