There are 3 main types of Equity Release

• Lifetime mortgages
• Home reversion plans
• Home income plans

Lifetime mortgages

• A lifetime mortgage gives you the choice of a cash lump sum or income with the option of no monthly repayments to meet. Usually interest is added to the lifetime mortgage loan throughout your lifetime, accruing at a fixed or variable rate. The loan plus interest is eventually paid back when the home is sold, usually when you move into long term care, or when you and your partner die.
• You retain full ownership of your home.
• Lifetime mortgages are available to younger people (aged 55+) although generally, the older you are, the more you may be able to release.
• We would only recommend lifetime mortgage products which include a “No negative equity guarantee” – meaning that the amount you owe will never be more than the property is worth.
• You can drawdown cash in a number of ways – as a lump sum, by making withdrawals in stages, as and when you need them, or you may be able to request a monthly income – you are in control and you don’t have to take all of the equity which may be available to you.
• You only pay interest on the amount released
• Some lifetime mortgage plans let you guarantee an inheritance for your family. Ask us for more information as not all schemes offer this facility. With a lifetime mortgage, the interest rolls up over time and must eventually be repaid along with the amount borrowed, and this can potentially reduce the value of any inheritance to nothing
• With some providers you can service the debt by paying the interest monthly, this stops the debt increasing

Home reversion 65+

With a home reversion plan you sell part or all of your home to a reversion plan company in exchange for a tax-free cash lump sum and a guaranteed lifetime lease with no monthly repayments to meet.

You stay in your home rent free for as long as you choose and provided you only sell part of your property, you should be able to leave the rest behind as an inheritance to your beneficiaries. Both you and the reversion scheme company share in any increase in your property's value, providing you have not exchanged 100% of its value.

• There are no monthly repayments to make
• You benefit from any increase in value of the percentage of the property that you still own
• Reversion plans may be available to those aged 65+ and you can typically raise more money from your home at a younger age with a reversion plan than a lifetime mortgage would allow
• The older you are, the more money you will be able to release with a reversion plan, however, the cash or income raised will not represent the true value of the part of the property which is sold

It’s important to remember that an increase in your capital or your income which arises from taking out a lifetime mortgage or a home reversion plan may affect your entitlement to State benefits. We shall be pleased to advise you of your options.

Home Income Plans

With a home income plan, equity is released via a lifetime mortgage and is automatically invested into an annuity that is then used to generate an income for life. The interest payments on the mortgage are deducted from the annuity, so the level of interest and amount of annuity income are always known. The income you receive will depend on prevailing annuity rates, your age at the outset and your gender.

Home Income plans do not produce cash benefits, which may be a negative factor for some borrowers, but for those who want additional risk free income, the combination of fixed interest payments and fixed annuity income may be attractive.

The advantage of using a home income plan to generate extra income is that they are better suited to those people who only need a small top up to their income. They are not particularly well suited to those people who require larger sums.

Please contact us for more information on Home Income Plans.

Each type of equity release scheme can help you to make the most out of your retirement by safely releasing equity from your home to spend entirely as you choose. All equity release schemes available from Equity Life UK come with SHIP guarantees to ensure your safety:

We are based in Maidstone and can serve clients not only in Kent, but throughout the UK as a whole.

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