Equity release mortgages provide the opportunity for individuals over 55 to release money from the property. They can do this on the home that they live in and avoid needing to make any monthly repayments. There are two types of equity release mortgages. These are lifetime mortgages and home reversion plans.
The two options are both regulated by the Financial Conduct Authority. Through an equity release mortgage, you will be able to draw a total lump sum or smaller sums on a flexible schedule that match your individual requirements. This can be crucial for retirement funding and there are countless plans available on the market that comply with the Equity Release Council product standards.
Long Term Mortgage
With this mortgage, you will not make monthly repayments. However, on some plans, you can choose to do this to ensure that the interest does not roll up. You still maintain ownership of the property and the total you owe including interest is repaid after you move to long term care or pass away. In this case, you’ll find that the repayment will not be completed until the last individual in the home either passes away or moves into long term care.
You can choose to receive the funds as one large, lump sum or through smaller payments. You will also be able to increase the amount when you need until you have borrowed the max available on your specific plan.
It is possible to protect some of the value of the home and leave this for your family. This means you can release equity in the property but still leave something for those who inherit your wealth. If the monthly repayments become unaffordable, you can also choose to roll up even after you have started this plan.
Home Reversion Plan
With a home reversion plan, you gain access to either all or part of the value of the property. You still gain the option of remaining in the property rent-free for the remainder of your life. The provider of this product will purchase all or part of the value of your home. This will take into account various details including your age and health. You then get your tax free lump sum or regular payments with a lifetime lease. This is what ensures you can remain living in the property. There will be no restrictions or changes to your living arrangements with this option. The percentage you own will also remain constant even if the value of your home changes. At the end of the plan, the property is sold off and sales are dealt with according to the proportion of ownership.
Are you trying to decide whether an equity release mortgage is a right option for you? If so, make sure that you speak to Kevin Hull, he will help you determine whether this is the right choice and ensure that you get the support you need on the market. Be aware that when completed correctly, an equity release mortgage should have no impact on your tax position or the state benefits. That said, it is still crucial that you do explore your individual circumstances first.