There may be a time in life when your assets have diminished, and you still have a need for additional income or a lump sum. The only asset you have remaining is your home and you don’t want to sell.
Equity Release may provide an answer. There are two types of Equity Release, lifetime mortgages and home reversion.
A lifetime mortgage is taken out on your property and secured against the value of your home. This may allow you to release a regular income or cash lump sum or a combination of both from the property. The interest is compounded and payable when you permanently leave the property. Some lifetime mortgages offer the facility of repaying some or all the interest on a regular or ad hoc basis without penalty. You, or your family, do not have to pay anything back until you (and for joint mortgages, your spouse) have died or the property ceases to be your main residence, for example if you have to go into care permanently. Until this happens you continue to own your own home.
Home reversion schemes are where you sell all or a portion of your property at less than its market value and in return you can have a tax-free lump sum, regular income, or both. You have the right to remain in your home as a tenant, but pay no rent. Either on death or if you permanently enter care, your property will be sold and the home reversion company will get their share of the proceeds of the sale. For example, if you sold a third of your home, the home reversion company gets a third share of the sales proceeds, leaving the remainder to go to your estate.
Equity Release may involve a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration. Equity Release is not right for everyone and may affect your entitlement to state benefits and will reduce the value of your estate.