Equity release allows you to access cash, or equity, that is tied up in your home and a number of companies offer equity release products. However, you have to be over the age of 55, and you have the option to receive funds in a lump sum or in smaller amounts or a combo of both. With that said, UK Care Guide advice two options so you’ll also learn how each option works.
The way a lifetime mortgage works are you take out a mortgage, which is secured against your main residence, but you retain ownership. You can choose to let the interest roll-up or you can make repayments. The loan and interest that has accrued are paid back when you either move into a care home or when you pass away. In short, usually you don’t pay the mortgage back while you’re alive and interest is added to your loan.
With a home reversion, you will either sell all or part of your home to a home reversion company/provider. In turn, you’ll receive regular payments or a lump sum. One of the best things about a home reversion, you are allowed to live in the property without being required to pay rent, until you die. However, you have to ensure the home and maintain it.
When the home reversion plan ends, then your property will be sold. The proceeds from the sale are then shared. As for how the proceeds are shared, this will depend on the remaining proportion of the ownership of the property.
What Should You Know About Equity Release
Compared to ordinary mortgages, equity release can be more expensive. The interest rate on a lifetime mortgage is usually far more expensive than a regular mortgage and if the interest is rolled up, then you could end up with a growing debt. Furthermore, home reversion plans will usually result in you getting less money for your home than if you were to sell your home on the open market. Another thing you should know is your entitlement to state benefits might be affected if you receive funds from an equity release.
There are many pros and cons of equity release, so weigh the advantages and disadvantages of them before deciding if an equity release is right for you. Also, it’s worth consulting with ukcareguide.co.uk professional that can provide you with advice. You might learn that an equity release is a right choice to go with.