Equity Release covers the whole area of older people using their property to release funds on which no monthly payments are made.
There are many reasons why somebody over the age of 55 might look to raise funds. The first and obvious reason is that surviving on a pension is often not easy, and many pensioners find themselves with a house that is paid for, but insufficient monthly income. They are ‘EQUITY RICH BUT CASH POOR’, and ‘NEED’ additional income. Another group are those that see retirement as an opportunity to do all those things that work curtailed, such as travel, a major holiday, buying a home abroad, renovating the home etc. This group ‘WANT’ the additional funds to achieve their life’s dreams.
Unfortunately, the early days of equity release caused many people to turn against the products as many were not well thought out and horror stories filled the newspapers of customers who ended up worse off by taking an equity release scheme. The industry is now very strictly regulated, and the influence of Safe Home Income Plans (SHIP) a trade body dedicated to making all plans simple, and safe for the client has changed people’s perceptions.
There are two main types of scheme. A ‘Lifetime Mortgage’ where the client, or clients take a mortgage against their home, which can either be a lump sum, or a smaller amount allowing further draw downs as necessary. Instead of making monthly payments the interest rolls up until the last surviving client dies, sells the property, or enters long term residential care. The property is then sold, and the debt repaid, with any surplus going to the estate of the client. The second is a ‘Home Reversion’ scheme. With this scheme the clients sell all or part of their home to the reversion company in exchange for a lump sum, and a lifetime lease on the property at nil rent. In general more money can be released using this type of scheme, but many people do not like the idea of selling their home to a third party. When only part of the property is sold to the reversion company, it guarantees that any beneficiaries will receive full benefit from the remaining portion, and thus protects a portion of the value for inheritance purposes.
People have not been slow to realise that equity release has many uses such as, clearing an existing mortgage or debt, IHT planning, helping grandchildren to start on the property ladder or funding a degree, buying a retirement home, bridging the gap between retiring and taking a pension, converting a home to cope with disability, taking the holiday of a lifetime. All are valid reasons to seek to release some of the equity locked up in your home.
Please call for more information, or look at www.moneymadeclear.fsa.gov.uk
THESE ARE EQUITY RELEASE MORTGAGES. TO UNDERSTAND THE FEATURES AND RISKS, PLEASE ASK FOR A PERSONALISED ILLUSTRATION.
