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Equity release schemes

There are three main types of equity release scheme, all which work in different ways and each coming with their own advantages and disadvantages.

Types of Equity Release Scheme

Lifetime Mortgages

A lifetime mortgage enables you to borrow an amount of money secured against the value of your home. Each month interest is added at a fixed rate, with the loan being repaid when the property is sold upon your death or if you enter into long term care.
Typically no monthly repayments need to be met during your lifetime with a lifetime mortgage equity release scheme.
You can typically release between 18-50 per cent of the value of your home with a lifetime mortgage, depending on your age.
All lifetime mortgages come with fixed interest rates. This means that the rate remains the same over the term of the loan, despite what is going on in the wider economy.

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Drawdown Lifetime Mortgages

A drawdown lifetime mortgage allows customers to take either a regular income, or make cash withdrawals as and when required. Interest is only charged on the money that is taken out; from the moment it is withdrawn. This simply means that you do not borrow money, and incur interest charges, until you need it.
With a drawdown lifetime mortgage you can secure a proportion of your home’s value to release at a later date.

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Home Reversion Plans

A home reversion plan involves you selling all or part of your property to an equity release provider.
In return you get a cash lump sum plus, a lifetime lease giving you the right to remain in your property until you and your partner die or move into long term care.
You should also be given the guarantee that you can move to another property and take the plan with you, subject to certain criteria.
With a home reversion plan, as long as you have not exchanged 100% of your property’s value, you will retain a fixed proportion of your property, meaning that you will definitely be able to leave something to pass onto your beneficiaries in your Will.
Any increase on the property’s value will be shared between you and the plan provider, in line with the percentage owed.
With a home reversion plan you can typically expect to receive between 30 - 60 per cent of the value of whatever percentage of your home you choose to sell. This is very much dependent upon your age and how long the company expects you to continue living in that property.

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This is an equity release plan. To understand the features and risks ask for a personalised illustration.

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