Don’t be put off by the many equity release options out there!
Like many over 55s, you’re likely considering equity release as a way to give you a financially free retirement. With myriad plans on the market, there are endless choices to consider. We’re sure that you’re asking: what are the equity release options?
By reading through this article, you can discover:
- The 2 main types of equity release available.
- The options available within these plans.
- Whether or not equity release will help you achieve financial freedom.
Let’s get started!
2 Main Types of Equity Release
A Lifetime Mortgage
The most common type of equity release is a lifetime mortgage, which involves taking out a loan against your home. Repayment of the loan only needs to be repaid when you die or moving into long-term care. Some financial providers give you loan repayment options if you would prefer to do so.
A Home Reversion Scheme
The other fantastic option is a Home Reversion Scheme. In such cases, you will sell all (or some) of your property to the lender at less than the market value. In return, you get to stay in your home rent-free until you pass away or move into permanent care. In addition, you’ll receive a lump sum, smaller monthly income, or a combination of the 2.
Learn more about: Home Reversion Schemes
Why consider equity release? Let’s find out!
The 4 Major Benefits of Equity Release
- Your property remains yours, and you can continue to live in it throughout your life, or until you need to go into a long-term care home.
- You will get a lump sum of money to spend however you want, or a regular salary.
- If you would like the inheritance money you plan to leave behind for your family untouched, you will have some options to guarantee its safety. These will impact the amount you can borrow.
- You are protected by the Equity Release Council. This body regulates the industry, including stipulating a ‘no negative equity’ clause. This means that your family will never pay more for your home than the value of your home upon selling, even if property prices plumet.
Are You Considering Equity Release?
So What Other Options Do You Have?
Knowledge is power, and this is no different when it comes to equity release. You need to know all your options to ensure that you aren’t missing out on what’s best for you. In addition, please speak to your financial adviser as they’ll be able to unpack all these different options.
Let’s unpack what these are!
1. Drawdown Plans
A drawdown plan lifetime mortgage operates similarly to other lifetime mortgage plans. However, you are offered more freedom with a drawdown plan.
A drawdown plan gives you the flexibility and freedom to take out cash from your home when and as you like. After taking out your lump sum, the plan allows you to ‘drawdown’ additional money in stages whenever you want. Many consider this a flexible option and can significantly assist in planning your finances and financial future. You only need to pay interest on the amount you borrow and not the full reserve.
2. Enhanced Plans
An enhanced plan is an option for you or your partner to consider if you have any pre-existing health or lifestyle conditions, which will allow you to release more money from your home.
Heart problems, high blood pressure, and diabetes are typically the health conditions that qualify one for an enhanced equity release plan. By lifestyle choices, this may refer to things such as heavy smoking. It is crucial to pick an adviser who will advise you on this as you may miss out on thousands.
3. Protected Plans
A protected plan offers you the possibility to secure and guarantee an inheritance for your loved ones.
Let’s say a couple can release £50,000 but would like to leave an inheritance for their grandchildren. They could take £30,000 from that amount, leaving 40% of your property ‘protected’ for them.
An alternative to this would be releasing equity for an early inheritance.
Gain inspiration from the: 12 MOST COMMON Uses of Home Equity Release
4. Combined Plans
There’s the option to take out an equity release with your partner. This means that they will be able to continue to live in your home until they pass away or move into permanent, even if you pass away first.
This is a great comfort and definitely something to discuss with your financial adviser.
Numerous Financial Advisers and Lenders
The first thing you need to do is select your financial adviser. You’ll be working with this person for the rest of your life, so make sure it’s someone you trust.
After that, your financial adviser will help advise on the best lenders for your circumstances. It would be best if you met with a few lenders who offer different plans before settling on your final selection.
Top Tip: You MUST use a lender who is a member of the Equity Release Council!
Got Questions? Check These First
Is There More Than One Type of Equity Release?
Yes, there is more than 1 option. The 2 main types being a lifetime mortgage and home reversion. In short, a lifetime mortgage is when you take out a mortgage on your home while remaining its ownership.+
Home reversion is when you sell part of your home or your entire home to a reversion provider to get a lump sum of money. You can still live there, but you’ll have to maintain and insure your home.
What Are the Some of The Benefits of Equity Release?
- You can opt for a guarantee that sets aside a percentage of your home, so your kids’ inheritance stays safe.
- Your property remains yours, and you live in it until you die.
- You can get a tax-free lump sum of money.
What Is The Best Type of Equity Release?
The best type of equity release will depend on your needs. It’s best to consult your financial adviser on the matter.
What's An Equity Release Lifetime Mortgage?
A lifetime mortgage is a financial product that lets you take out a loan secured against your home. The loan does not need repayment until your death or if you move into long-term care.
Equity release is a financial product that allows you greater flexibility and freedom in the latter stages of your life. With so many options available to you, it’s best to speak to your financial adviser. They’ll help you find all the best options available for you.
Want to know how much you could release? Try our release equity calculator.