Equity release could be the ideal way to unlock some of the money you have tied up in your house. If you have paid off, or nearly paid off, your mortgage, then it may be possible to claim back some of the money from your house and still retain your legal right to live there. There are issues regarding the death of the pension and equity release, so it pays dividends to do your research.
There are several different types of equity release that might suit your situation. So, what are the differences between each scheme and how will you know which one is the most suitable for you?
This plan involves you taking out a loan secured against your home. You keep full ownership but you have to pay back the mortgage as well as the interest. When you die or move away, you repay the balance on the loan.
Good schemes will ensure that the repayments you make will never exceed the value of the house. Most reputable providers will also offer a facility whereby you can draw smaller sums as and when you need them rather than giving you one large lump sum. The money you can release is more flexible and you retain greater security.
On top of this, some packages will offer constant interest rates. These can be guaranteed to remain unchanged for a number of years or even until your death. This means you don’t have to worry about other financial matters impacting you and your situation.
This is when you sell all or part of your home to a reversion company. That means you no longer own your home but you retain the legal right to live there, usually rent free for the rest of your life or until such time as you move out.
When the property is sold the reversion company gets their payout. You may not get the full market value of your home because the reversion company has to wait years for their return, but this is still a viable way for you to free up invested money without losing your home in the process.
You sell the house and in return get the right to rent it back for a fixed term. You don’t have the right to stay there for life, however if you are planning on moving or downgrading then this scheme could potentially work for you as you will get a better rate than with a full reversion. Make sure that you check that the buyer is authorised to do so with the Financial Services Authority before committing.
Remember that equity release is a great option but is one which should be taken only after considerable thought and research.
With all of these methods you need to ensure that you receive solid independent advice and research the matter thoroughly. Websites such as www.ageuk.org are a great place to start and have some very detailed information about what steps you will need to take before committing to anything.