Equity Release

Introduction

Under an equity release scheme, homeowners are able to release a proportion of their property in return for a cash lump sum, an income for life or combination of the two.

There are many reasons why people may take out an equity release plan and some of the more common reasons are:

To supplement inadequate pension income
To fund essential repairs to property
(Home improvement, Car, Holidays etc)
Debt consolidation
To meet care needs
To financially assist children/grandchildren
Inheritance Tax Planning

There are two principal types of equity release scheme:

Home reversions
Lifetime mortgages

Home Reversion Plan

With this scheme, you sell all, or a percentage, of your home to a home reversion company in return for a lump sum, an income for life or a combination of the two.

Importantly, if you continue to own the portion of the property you have not sold which means that your estate will benefit from any uplift in the value of this portion of the property when you die. If you have sell all of your home you will no longer own the home and will not benefit from any future increase in its value.

You can continue to live in the property paying a peppercorn rent until you die or until you have to sell the house to go into a nursing home.

Lifetime Mortgages

In contrast a lifetime mortgage, you take out an interest only mortgage against the value of the equity in your property. With the majority of lifetime mortgages you do not have to pay any interest on the mortgage during your lifetime as this is ‘rolled up’ – or added to the mortgage capital, with the whole debt paid off, when you go into long term care or die, from the proceeds of the sale of the property. An interest rate of 7% would see the amount owing on a rolled up interest lifetime mortgage double in just over ten years.

Most equity release providers are members of Safe Home Income Plans (SHIP). These providers give their customers a ‘no negative equity guarantee’ which means you not have your home repossessed if the debt on your property (the capital, plus interest) exceeds the property’s value. SHIP members also have to adhere to other criteria which are designed for the benefit of the consumer.

Both home reversions and lifetime mortgages can be taken out on a joint basis so that if one partner dies or goes into care, the other partner has the right to remain in the property.

Gow’s has all the in-house expertise to help guide you through the many pitfalls that may befall  you in this highly complex area of financial planning.

Contact Gow’s today for a free initial consultation or for more information on equity realese visit our dedicated website. www.equity--release.com