Equity release is becoming a popular product for those who are planning their retirement. Equity release schemes are flexible and are there to provide either a lump sum of money or an extra income each month. Equity release schemes are aimed at the ages of 55 and over. Equity allows you to release the money that may be trapped in your home. You have the choice of a home reversion plan which is where you can sell part of your home in return for money. The money is recouped when you die or go into long term care and your house is sold. Compare equity release schemes to determine the best possible outcome for you and your situation as you have more than one option.
The other option is a lifetime mortgage. Money is given out as a loan and is paid back once your house sold. You also have the option of paying back some of the loan through your life depending on the type of lifetime mortgage that you choose. As equity release is popular providers are now offering special deals for you to take advantage of.
Compare Equity Release Schemes
With Aviva Lifestyle Flexible option they will offer a drawdown lifetime mortgage that has a fixed interest rate for the remainder of your life. A drawdown plan is based on your age and property value. You will then be given a cash facility where you are able to decide how to draw the money. With this plan you are also able to protect your inheritance and add this as an option. The fixed interest rate that they are offering starts at 5.68%. (5.88% representative APR)
Hodge Lifetime also have a special running with their Lifetime Flexible Drawdown Plan which is in essence a roll up equity release scheme that will give out an initial sum of money and the cash facility can be drawn from later on. The plan also has a downsizing protection option that means if you move house after 5 years and downsize you will not be required to pay any early repayment charges. If you downsize before 5 years then you will enjoy a reduced penalty fee of the original amount borrowed. They will also provide a free valuation of up to £350,000, thus Hodge provides the flexibility that you may need.
Stonehaven is another company offering equity release schemes and offer the Stonehaven Interest Select plan which provides individuals over the age of 55 to get an interest only lifetime mortgage that will last through their retirement. They accept monthly interest repayments, so that the balance is level and you can pay the minimum of £25 per month or the entire amount each month. Also if you need to stop making payments then the interest will just start rolling up. Interest rates from Stonehaven start from 5.94% as of April 2014.
Benefits and Disadvantages to Home Reversion and Lifetime Mortgage
Under separate categories it is important to consider the advantages and disadvantages of your options. You already have some information about the plans available, yet you still need to look at it from a cut and dried perspective.
Home reversion requires a part of your home to be sold. Under this plan you gain a lower percentage of your home value than it truly is. This percentage is based on the number of years you might remain in the home. At the end you sell the remaining part of your home hoping the value remains the same or increases so your beneficiaries see a higher inheritance. They cannot own the home unless they wish to buy back the portion already sold. This is usually at current market cost and is not very cost effective.
Lifetime mortgages offer better options in terms of getting a package that suits you more as you can see with Hodge, Stonehaven, and Aviva. You can elect to pay some interest, take a smaller lump sum with monthly payments, or simply hold off on repayment until you are ready to sell or all homeowners pass on. The disadvantage is that repayment does have to be made, which could sell the family home as a means of the repayment leaving no inheritance or very little inheritance behind.
If you are looking at retirement then you should take advantage of these offers whilst you can. They can all be viewed here: equity release. It is very important that you compare equity release schemes in order to determine the best possible policy and setup for you. Always speak with a financial adviser and your family to ensure you have made the right choice.