This is really for people who want to stay in their own home and can afford to keep the property maintained. If you can’t or are likely to move in the near future, it’s probably cheaper to trade down or even take out a loan. To seek specialist advice, make sure you call 0300 500 5000 or visit a FCA regulated financial advisor
Make sure you compare the different schemes
For example, if you take out £45k @ 5% then after five years you will owe £57,433; after 25 years, this will be £152,387. In contrast, if you take out £45k @ 9% after five years you will owe £69,239; after 25 years you will owe £388,039
Rolling up the interest will mean the size of the loan increases – but unless you have opted to pay the interest, you will have no repayments and if taking out equity release via a
council member you will never owe more than the value of the property as they have a no “negative equity guarantee”.
In some cases, it is possible to ring fence a proportion or amount to protect for your inheritance.
Know what happens when property prices go up or down
It is important to know what happens to your payments and money if property prices go up in value. Both Home Reversion and Lifetime Mortgages are likely to take ‘their share’ of the increased value.
In contrast, if your property value falls, both you and the company will receive less on the final sale, but as the home owner you will have already had all of your money out when the property was valued at the higher amount.
Choosing the right company
Make sure equity release firms are members of the Equity Release Council as they allow you to ‘port’ your loan from one property to another, without financial penalty, although legal fees will be charged.
Things to consider are:-
Home Reversion Plan means zero rent
A Home Reversion Plan allows customers to access all or part of the value of their property while retaining the right to remain in their property, rent free, for the rest of their life.
With a Home Reversion product the provider will purchase all or part of their house taking into account the age and health of the customer and will provide them with a tax free cash lump sum (or regular payments) and a lifetime lease, guaranteeing you the right to stay in your property rent-free for the rest of their life.
The percentage the customer retains in their property will always remain the same regardless of the change in the value of the property (bar you taking any further cash releases). At the end of the plan your property is sold and the sale proceeds are shared according to what proportion of the property you and the company own.
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