The following are the main types of plan to consider:
With this type, you can take out a loan secured against the value of you home*. The amount you can borrow depends on your age and the value of your property: the older you are, the more you can borrow. The amount is calculated as a percentage of your property’s value. The interest rate is usually fixed, and is around 6.5% - 7.5% currently although rates may be higher or lower than this.
You repay nothing until the house is sold on your death(s) or when you go into long-term care. At that point loan and compound interest become due. With roll-up schemes you continue to own your property and as a result you benefit from any house price appreciation during the term of the loan. However, as you make no repayments, the interest on the loan can accrue quickly, although Safe Home Income Plans (SHIPs) members’ schemes offer a no-negative-equity guarantee.
The amount of money that will be left when the house is eventually sold will be its market value at that time less the loan and interest due.
* Think carefully before securing debts against your home.
These are the oldest forms of Equity Release dating back to the 1960s.
With these schemes, you sell your home, or a proportion of it, outright, in exchange for a cash lump sum. The lump sum is usually equal to a proportion of the value sold, depending on your age. For example, at age 70, with a home worth £200,000, you might sell 65 per cent of you home and only receive 25 per cent of its value. When you die or go into long-term care the reversion company will take 65 per cent of the house proceeds. You still own the other 35 per cent: the reversion guarantees that the residual part of the property’s value will be untouched.
With either type of plan you can generate cash immediately which may be used to purchase an income for life (also known as an annuity) or for any other purpose. This might be very attractive if you have a shortfall in your pension income against your outgoings.
These combine features of roll-ups and reversions, with lower interest being paid in exchange for a share of the equity.
You take out a mortgage, use it to purchase an annuity, and the annuity pays off the loan and leave you with some income. These are now rarely sold today and there is now only a handful of this type of Equity Release products on the market.
We have the expertise and excellent relationships with lenders to ensure that we secure the funds you need, at competitive interest rates, in an efficient and hassle free process that we handle for you from start to finish.