You probably have a picture in your mind of what you want your retirement years to be. But do you have the funds to actually turn your ideas and dreams into reality?
That's where equity release could help - by unlocking some of the capital tied up in your home. Many people have already used equity release to help their retirement. But how do you find out what equity release is and if it might be right for you?
There are a number of things you need to consider when thinking about equity release and a number of options that might be available to you.
It's important to realise taking a lump sum plus costs will reduce the value you have in your home and therefore the amount of any inheritance you leave. Your tax and welfare benefits may also be affected.
Two of the main types of equity release products are:
A Lifetime Mortgage
This is a loan secured against your home, where the original loan amount and interest are repaid by the sale of your property when you die or if you need to move into long-term care. Depending on the plan the interest rate will either be fixed or variable. With one option you can take the total amount you borrow as a single lump sum. This is referred to as a 'lump sum' lifetime mortgage. Instead of taking the amount you borrow as a single lump sum, some types of scheme allow you to agree a total loan amount and take (drawdown) money as and when you need it. This is often called a drawdown lifetime mortgage. With some lifetime mortgages there's even the option to receive a regular income instead of/as well as a lump sum.
Unlike a standard mortgage, you do not have to make regular monthly payments, the loan and interest are repaid by the sale of your property when you die or if you need to move into long-term care. The interest charged throughout the term is calculated on the total amount borrowed and the interest already added, which quickly increases the amount you owe.
A home reversion plan
Instead of a loan secured on your home, with this type of plan you actually sell part, or all, of your home to the home reversion provider. In return they pay out a lump sum/income at the start of the plan and allow you to continue to live in the property with either no or minimal rent. However because the money is provided upfront (and you continue to benefit from living in your home) you will get less than the full market valuation for the percentage of the property sold.
When you end the plan, die or if you need to move into long-term care, the reversion provider will sell the property, take their share of the money and pay the balance, if any, to you or your estate.
Apart from the main types described above, there are other schemes on the market. Products such as interest-only mortgages, shared appreciation mortgages and home income plans, may also be referred to as equity release schemes. You can find out more by contacting one of our Equity Release advisers now on 01524 405855 or fill out the form below and we'll call you back as soon as possible.
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