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What are my options?
The information below is there to give you an overview of what is available, including the advantages and disadvantages of each type of plan - a specialist independent adviser will be able to explain the options in more detail.
Option: Lifetime Mortgage
Method: Secure a loan against your home
Details:
Interest is charged and accumulated on the loan and is usually only repaid when the property is sold, which usually happens when you die or when you enter long term care. If you have a partner, he or she has the right to remain living in your home. This means that you normally don’t need to repay anything during your lifetime.
Advantages:
- You continue to own your home (estate will benefit from any increases in its value)
- You can normally repay the loan at any stage (although early repayment charges may apply)
- Most loans are fixed rate, so no risk from increasing base rates
- Chose tax-free cash lump sum or income (typically no monthly repayments)
- Option may be more suitable for younger people who might not be able to take out a home reversion plan due to their age
Disadvantages:
- Reduction of inheritance
- Early repayment charges might apply
- Normally can't unlock as much money with a lifetime mortgage as with a reversion plan
- You won’t benefit from falling interest rates (with fixed interest rate loans)
- Interest compounds so the outstanding loan can increase quickly
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
Option: Drawdown Lifetime Mortgage
Method: Secure a loan against your home and take money out in instalments.
Details:
This is a lifetime mortgage, but with the option to ‘draw down’ the loan in stages.
Advantages:
- Only pay interest on the amount withdrawn
- Make withdrawals when needed or request a regular income
- Continue to own your home
- You can guarantee an inheritance with some plans
Disadvantages:
- Not easy to increase amount when you’ve chosen a regular income
- Restrictions on minimum withdrawal amount
- Early repayment charges could apply
- Usually higher interest rates compared to standard lifetime mortgage
- Reduction of inheritance
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
Option: Home Reversion Plan
Method: Sell all or part of your home to the provider.
Details:
For selling all or part of your property to the provider, you receive a cash lump sum and the right of lifetime lease. Upon your death or move into long term care your home, or the proportion that you sold will revert to the provider.
Advantages:
- No monthly interest payments
- Receive tax-free lump sum to spend as you wish
- Stay in your own home
- Able to guarantee an inheritance (when only proportion is sold)
- Benefit from any increase in the property’s value (on your remaining proportion)
- All home reversion plans are regulated by the Financial Services Authority
Disadvantages:
- Not usually full market value of share sold paid out (due to no monthly repayments and typically rent free living)
- Completely or partly is sharing in any increase in the property's value
- Plans usually can't be reversed
- Reduction of inheritance
This is a home reversion plan. To understand the features and risks, ask for a personalised illustration.
Option: Home Income Plan
Method: Reversion plan or lifetime mortgage
Details:
This option is designed to give you a fixed income for the rest of your life. The equity released is invested into an annuity that produces the income. Additional lump sums are possible, but might be restricted.
Advantages:
- Guaranteed income plus possible cash lump sums
- More attractive for older ages as the annuity will pay a higher income
- With home income plan the annuity income is typically higher than a stand alone annuity
Disadvantages:
- You can loose out by taking a lifetime income when death occurs in the early years of the plan (some plans have protection)
- Less attractive for younger ages as the monthly income will be lower
- Low interest rates decrease annuity rates
- Reduction of inheritance
This is an equity release plan. To understand the features and risks, ask for a personalised illustration.
Other options to raise some extra cash for your retirement years that should be considered before equity release could be:
- Downsizing, ie, moving to a smaller property
- Moving in with family
- Obtaining money from family
- Taking out other borrowing options
- Using savings or investments
- You may decide it's best to do nothing