Equity Release Mortgages and Home Reversion Plans are only for those aged 55 and over. In general terms the older you are the more you can release from your property. This applies to both types of scheme.
The availability of such schemes has diminished significantly since the credit crunch, so the advice of an appropriately qualified Independent Adviser is essential in finding the best deal from all UK providers.
Lifetime Mortgages (also referred to as Roll Up Mortgages)
A Lifetime Mortgage works like this -
- Either a Lump sum. Or monthly income (or both) is released from the equity in your home
- Interest is charged on the loan but the client makes no Monthly payment
- Instead, the interest is added or ‘rolled up’ on the original loan
- You pay ‘compound’ interest (interest is charged on interest etc)
On the sale of the property the loan plus the compound interest is repaid It is critical to note that because compounding of the interest takes place there is a risk that should the loan last a long period of time it could grow larger than the value of the property.
However most lenders give a ‘no negative equity’ guarantee this ensures you can never be forced to sell or move out of your home.
Home Reversion Plan
You sell your home or a percentage of it to a home reversion provider but retain the rights to live in it rent-free for the rest of your life.
There are options to receive both lump sum and income based payouts.
The reversion company is unable to sell the property until both you and your spouse are deceased or you decide to move into long term care. In general terms for the percentage released you will receive 50% (half) of the amount ‘given up’.
Example : you sell 50% of your £100,000 home. £25,000 received as lump sum.
This is to ’pay’ the home reversion provider in the interim until point of sale (which may be 20 – 30 years in the future).
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
