There are two different types of Equity Release Schemes:

• Lifetime Mortgages (formerly referred to as roll up or cash release schemes)
• Home Reversion Plans

Lifetime mortgages can either take the form of:

• Lifetime Roll Up Mortgages (where no monthly repayments are required)
• Interest Only Mortgages (where monthly repayments are required)
• or Home Income Plans.

• Lifetime Mortgages

Under these schemes you keep full ownership of your property but you obtain a secured loan paid as either a lump sum or monthly income (or both). The mortgage is not required to be fully repaid during your or the last survivors lifetime, and a number of these schemes require no monthly repayments. To find out more about Lifetime Mortgages click here.

• Interest Only Mortgages

There are a few Building Societies and Banks that are prepared to offer ordinary Interest Only Mortgages for life to retired people, to allow them to release capital. Interest Only Mortgages mean that you only repay the interest not the capital to the lender, therefore, the monthly repayments can be relatively affordable. To find out more about Interest Only Mortgages click here.

Your home may be reposessed if you do not keep up repayments on your mortgage.

For researching and arranging a mortgage for you, we will make a charge. This can be paid by you either as a fee, usually 0.5% of the loan payable on application to the lender, but subject to a minimum of £750 or a combination of fee and commission, so that the total remuneration received would not be less than £750.

• Home Income Plans

With this form of Lifetime Mortgage you mortgage a percentage of your property to a provider who in return gives you an annuity (a regular income for the rest of your life based on your age and sex). Unlike a reversion scheme you automatically have the interest on the loan deducted from the annuity payments each month. This way the loan doesn't increase like a Lifetime Roll Up Mortgage. To find out more about Home Income Plans click here.

 

• Home Reversion Plans

This type of scheme allows you to sell part or all of your property to a provider in return for either a lump sum or income and a lifetime right to remain living in your property.  You can sell up to 100 per cent of the value of your property, but you will only receive a heavily discounted sum of money which could be as low as 25% per cent of the current market value at age 65% rising to typically 60% at 91 years of age.  The provider discounts the amount of cash as compensation for the fact that they may have to wait many years before receiving their money back on your (or in the case of joint applications, the last persons) death or need to move into care.  When the house is eventually sold, the lender receives his percentage of the sale price, not just the market price at the time the arrangement was agreed.  To find out more about Home Reversion Plans click here.

 

Which Scheme is Right For Me?

The answer will depend upon many factors, including:

• Whether you have dependents, which you want to leave money to - If not a Home Reversion Plan where you can sell 100% of your home, may give you more money from the property than Lifetime Mortgages.

• Your attitude to risk regarding how much you want to leave your beneficiaries – Home Reversion Plans where you sell only a percentage of your home guarantees that no matter what happens to the value of your property in the future, the remaining percentage will always be available for your beneficiaries. This cannot be said for most Lifetime Mortgage schemes where technically the full value of the home can be used up if you live a long time and the value of property does not increase, or even falls. However, there are now a couple of lifetime mortgage providers, who provide a Protected Equity Release scheme that will allow you to protect up to 50% of your home’s current value, which can be very reassuring if you feel house prices may fall.

• How much you need to raise - Lifetime Mortgage schemes may not provide sufficient money, larger sums are available under Home Reversion Plans providing you are willing to sell a considerable percentage of your homes ownership.

• Your Age / Youngest Age – Home Reversion plans are not generally available until the youngest applicant is 65 whereas Lifetime Mortgage plans are available from 55.

• Life expectancy - As a Home Reversion plan provider's  interest is effectively charged upfront , usually based on average life expectancies, if you (both of you in the case of joint plans) are unlikely to live a long time (or intend to sell the home shortly after taking the plan) you could loose out more under a Home Reversion Plan than a Lifetime Mortgage scheme where your beneficiaries would only be liable for the initial amount borrowed plus interest due during your lifetime.

• How much spare income you have each month - If you have considerable spare income each month and only want to release capital to spend, an ordinary interest only mortgage might be better as providing you pay the interest each month, the debt would not build up and the interest charged by the lender would be lower. Alternatively, if you didn’t want the extra monthly expenditure a specialist Equity Release Scheme would be better.

• Whether you currently receive or may be entitled to, State Benefits or grants. As you may loose or affect your entitlement to State benefits and grants, and therefore any scheme should only be considered if the benefits gained, outweigh any reduction in benefit or grant entitlement.

This advert refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration.