There are two main types of equity release product available, Lifetime Mortgages and Home Reversion Plans. Both products are very similar in many ways but are also very different when it comes to ownership of the home.
A lifetime mortgage allows the homeowner to continue owning the home. However, with a Home reversion scheme the owner sells ownership to the Home Reversion Company but both schemes allow the applicant to retain the right to stay in the home as long as they wish.
Both schemes also allow the over 55’s to release money that is tied up in their home to spend however they like without having to make monthly payments to repay the loan. Beware of the interest roll up though, as this can increase the size of the loan significantly as each year passes.
Demand for equity release is rising fast with over £1 billion raised in 2013 by the over 55’s. Why? Well the most common reasons for releasing money tied up in people’s homes this way fall into one of two categories.
Firstly, they need to release money, because they have debts they can no longer afford to service or they have to pay off their mortgage or even because their retirement income has fallen well below their expectations and they just cannot afford to live without getting into more credit card or personal loan debt.
The second category is that they want to release the cash for things like home improvements, holidays, cars or even a gift to a family member. One of the fastest growing uses of equity release is to provide children with a deposit to buy their own home.
Equity release should not be entered into lightly though and anyone considering this should always explore all of their options first, even consider selling the home and downsizing to release funds. Only when all of the options have been considered and excluded, should equity release be chosen. Even then it should always be discussed with family and those who may be expecting some inheritance in the future.
Advice should also always be taken from a suitably qualified Equity Release Adviser and a Solicitor.
If you would like to know more about equity release, please contact Lee Tabreham at CDG Financial Services Limited on 0115 977 1155 or email leet@cdgfs.co.uk