How Equity Release Plans Work
The equity release market has increased in recent years with more and more people deciding to make the most of the increase in the value held within their homes without needing to move somewhere cheaper and smaller.
Of course, by releasing some of the equity in their property, people effectively reduce the value of their estates for any of their dependants to benefit from. So, equity release is not the ideal solution for everyone, especially for those people with dependants to consider.
There is an Age Partnership equity release guide which explains the four main types of equity release plan available. Choices include taking a lifetime mortgage which is repayable after death and the sale of the property, along with any interest accrued on the loan. Other people prefer to pay the interest during their lifetime, so that only the initial amount borrowed is repayable from their estate. This is called an interest only lifetime mortgage.
A home reversion plan is where you sign over partial or full ownership of your home in exchange for a lump sum. People who sign up to a home reversion plan have no repayments to make, but are eligible to remain in their homes for the rest of their lives rent-free. The equity plan provider offers a sum that is lower than market value for a home reversion plan to compensate for the years of rent-free living you will have in the property.
People can use the agepartnership.co.uk equity release calculator to get an idea of how much equity they could release from their property and how much the interest payments would be. Age Partnership is an independent financial specialist for over 55s. It does not sell its own financial products, but will advise if equity release is the most suitable option and if so, the company searches the entire equities release market to find the best available deal for its clients.