How Equity Release schemes work
Equity release schemes allow you to access your property’s value for more cash in retirement
If you’re facing a retirement income shortfall or need to meet a sudden unexpected expense, equity release can seem attractive. It will allow you to tap into the wealth that you have built up in your property without the need of having to move. But before you decide taking this option, there are key aspects of it that you need to know.
This is where All Saints Financial Solutions will guide you through the process and make sure it is in your best interest or not.
Types of scheme:
With Lifetime Mortgage, you borrow a percentage of your home’s value. Interest is charged on the amount but nothing usually has to be paid back until you die or sell your home. The interest is compounded or ‘rolled up’ over the period of the loan, meaning your debt is likely to double in 11 years at current rates. We will only recommend schemes that have a no negative equity policy meaning you will owe nothing should it go into negative equity.
Home reversion schemes
With Home Reversion Plan, you usually sell a percentage of your property to the provider for less than the market value. You have the right to stay in your home for the rest of your life if you wish. When you die or move into long-term care and the property is sold, the provider gets the same share of whatever your home sells for as repayment. For example, if you sold 50% of your property to the provider, it would get 50% of the sale price. You may pay a small rent called a peppercorn rent. ( a small payment per month)
You can take out some lifetime mortgages from the age of 55, but home reversions are available only to people aged 65 or older. Some enhanced products offer more favorable terms if you’re a smoker or have health problems that could decrease your life expectancy.
Interest only time bomb
Many people took out an interest only mortgage in the past and as they approach retirement are finding it impossible to re-finance to extend their term and also to stay on interest only. If you are aged over 55 equity release may be a possible solution where you can continue to pay the interest payment to avoid rollup of the interest. Please give us a call to discuss this if you have an interest only mortgage.
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All Saints Financial Solutions
Northants, England NN2 8QX
Tel: 01604 245 486