There are two types of equity release products currently available on the market, these are ‘lifetime mortgages’ and ‘home reversion plans.
Equity release is becoming increasing popular with retired individuals who are looking for a way to obtain money from their property without having to move or meet consistent monthly repayments.
There are two types of equity release products currently available on the market, these are ‘lifetime mortgages’ and ‘home reversion plans’; both are regulated by the Financial Conduct Authority and these modern equity release products require borrowers to obtain legal advice before committing to borrowing in this way. Equity release is not the perfect option for all, however for many it provides a useful mechanism whereby home owners can draw a lump sum, regular sums or both, from their home, while still living there.
This product allows individuals to borrow against the value of their home, releasing a loan which can be used to provide an income, lump sum, or both. The key point is that the owner who is borrowing the money will still retain full ownership of their home and the loan does not have to be repaid until the borrower dies or moves into long term care. Interest is payable, usually at a fixed rate, and this can either be paid or ‘rolled up’
Home reversion plans
In its basic form, this product requires all or part of the borrowers home to be sold to a private company known as a ‘reversion company’, or a group of individual investors and, in return the borrower will receive a cash lump sum, an income or both. The borrower will be able to remain living in the property, without paying rent, for the rest of their life. When the property is eventually sold, the ‘reversioner’ receives the proceeds of sale, depending on what share of the property the borrower sold to them.
Equity release can provide an alternative solution, and fulfils a crucial role for many, in retirement funding. The market has a range of products available, and these are being continually refreshed and innovated; we would strongly recommend that you discuss your needs with a specialist financial adviser. Whether you need to release money to repay debts, adapt your home to enable you to remain living there, carry out crucial repairs, assist family with an ‘early inheritance’ or embark on the holiday of a lifetime, equity release may be able to provide a solution for you.
Our equity release experts will advise you fully on the legal meaning and effect of your product, including your rights and obligations, and ensure that you are directed to obtain advice on estate planning and wills, if appropriate.