A person who is over the age of 55 can receive money from their home to spend any way that he or she wants. There are two main equity release plans, which are home reversion and lifetime mortgage. Before choosing an equity release plan, always consult with an independent equity release adviser, so that he or she can help you pick the right plan.
An equity release adviser will tell you how to release equity from your home. The older that you wait to release equity, the more money you can get. The rationale is that the shorter your life expectancy has remaining, the less time it has for the interest to accrue over. Once the financial adviser chooses the best equity release plan, you can find the company over the Internet and apply.
The equity release adviser will initially conduct a factfind in order to gather all information regarding your current situation. They need to ensure that all bases are covered & any advice offered does not have an adverse impact on any other areas of financial planning such as means tested benefits.
Once this has been undertaken the equity release adviser ill discuss the different plans available. One equity release plan the financial adviser will tell you about is a home reversion. With a home reversion, you will have the option to leave an inheritance for a family member. In order to leave an inheritance, you can only sell a percentage of the property. The piece of property that the family member has may increase in value over the years, which may allow the person to get a good amount of money, if the person decides to sell it in the future or leave that part to the children.
With a lifetime mortgage plan, you will receive a cash lump sum also. There are two types of lifetime mortgages, which are interest-only and rolled-up interest. With an interest only lifetime mortgage, you will have to repay the interest back monthly while living in the home. By paying off the interest, you are protecting the property, as the balance will remain constantly the same, so that more can be inherited by your heirs.
The amount that can be taken on a rolled-up equity release plan is based on the value of your home & the age of the youngest borrower. The lender provides a cash lump sum or monthly income to the borrower.
With all of equity release loans, you can remain in the home rent free, except as discussed earlier with an interest-only loan, until you pass away or go into a long term care. The homeowner always has the option to sale their home. When this happens, it is a good idea to include the interest that has accumulated from receiving a loan. Any money that is left over will be given to you. A retired person should not have to struggle to meet their needs after a long working life. If they have a home & struggle making ends meet they should consider borrowing some money from their home, but only after consultation with their equity release adviser & the children upon whom it will affect the most long term.
