Property wealth is rapidly emerging as a mainstream retirement funding choice with equity release being in the frontline.
In fact, the growing base of equity release consumers has been sky-rocketing with the numbers showing an increase from 60% in 2016 to 87% in June 2019.
It has also been met with increases in consumer options between lifetime mortgages and home reversion schemes, and even though most people prefer lifetime mortgages, the home reversion scheme is also quite popular.
However, even with these changes in the market, you might still not be aware of the perks of taking out an equity release scheme.
Well, here’s a comprehensive guide that will navigate you through the ins and outs of equity release and what its packages are.
Be sure also to check out sovereignboss to see more about how does equity release work and use the equity release calculator.
Get to Discover the Ins and Outs of Equity Release Schemes
There are various ways for you to make your retirement more comfortable; from repaying your standing mortgage to calculating the price of living and setting cash aside to care for your clan. However, one thing you can’t predict is the need for flexible finances.
With this guide, you get to navigate through the pros of equity release, learn about the security measures in play eventually get to evaluate whether a lifetime mortgage or home reversion is perfect for you.
What Is Equity Release?
If you’re a homeowner aged 55 years plus, you can use equity release as a means to access the capital locked up in the value of your estate.
It also consists of two options to choose from, namely: lifetime mortgages or home reversion plans.
#01. Lifetime Mortgage Schemes
It’s the most popular type of equity release. In this scenario, the estate remains 100 per cent in your name, thus giving you the freedom to reside there for the rest of your life.
Ultimately, a lifetime mortgage is usually reimbursed either when you die or if you move into long-term care.
The Pros of Taking out a Lifetime Mortgage Plan
You get to retain full ownership of your estate – you’ll still be the legal proprietor of your estate like the traditional mortgages. You pay interest on the equity you release, which is technically a loan. You get to repay the loan plus interest when you pass on or move into permanent care.
You’ll never owe more than the estate’s market– lifetime mortgage schemes offered by plan providers who are required to be members of the Equity Release Council have the ‘no negative equity guarantee’, so whether property prices go up or down, the amount you repay eventually won’t be more than the current value of your estate.
#02. Home Reversion Plans
A home reversion scheme, on the other hand, allows you to put up a proportion of the value of your estate for sale in return for a tax-free lump sum amount of cash or a series of capital amounts. In this scenario, your home reversion company offers you a lifetime tenancy, thus allowing you to live rent-free in your residence for your lifetime.
The Pros of Taking out a Home Reversion Plan
You can live rent-free – you have the right to reside in your property for the rest of your life
Unlike the lifetime mortgage plans, with this scheme you don’t pay interest on the money you release – it is because the proceeds of the sale of your manor (or part of it) that goes to the scheme provider, and not the mortgage
It allows you to create an inheritance for your family– if you only sell part of your estate to your scheme provider, you still have equity in your property and your estate will benefit from any future rises in property prices on the share you retain ownership of.
An equity release scheme could be one of the simplest ways to assist you in making more of your retirement. However, it’s essential that you consider whether it’s the ideal choice for you. You need to ensure that you always seek professional advice before making a decision, as there may be other choices more suited to your situation that you could use to access similar amounts of cash.