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Equity
Release Schemes Jonathan Gerber Equity
release allows homeowners to unlock the equity within their property
without having to sell their property and move out. Home
Reversion Plans The advantage of home reversion plans is they normally allow homeowners to release the maximum lump sum from their property, without concerns over future house prices. The disadvantage of home reversion plans is that you will forego some or all of the potential future growth in the value of your home. Key
Features of home reversion plans The amount of equity you can release under a home reversion plan will depend upon your age, and the value of your property. With home reversion plans, also known as home income plans, you sell all or part of your property to the plan provider. As you sell your property in exchange for the equity released the plan provider takes the risk on future house prices. If you sell 30% of your property to the plan provider, known as a partial reversion, the plan provider will be entitled to 30% of the sale price when your property is eventually sold. If you sell 100% of your property to the plan provider, known as a full reversion, the plan provider will be entitled to 100% of the sale price when your property is eventually sold. Note you will not receive the actual cash equivalent lump sum as the percentage of the property sold to the home reversion plan provider. The actual cash value offered will be subject to the discount factors applied by each individual home reversion plan provider. If you sell all of your property to a plan provider under a full reversion plan you will become a lifetime tenant in your home. You will not be charged any rent but you will be responsible for maintaining the property and any repairs. Home reversion plans normally offer a choice of a tax free lump sum or a guaranteed regular monthly income. Home reversion plans are available from age 65 and normally require a minimum property value of £40,000. Most plan providers do not impose an upper age limit, and will release a greater percentage of the value of the house for older applicants. Subject to the individual terms of the home reversion plan providers you may be able to move properties in the future. There are different terms applied to partial reversions and full reversions. All providers who offer home reversion plans and are members of the Safe Home Income Plan scheme (SHIP) provide guaranteed tenure and a no negative equity guarantee. This guarantees that you will always have rent free tenure of your home until you die regardless of the future value of your house. Using a home reversion plan means you will only be responsible for your home contents insurance as the plan provider will be responsible for the buildings insurance.
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Equity Release Mortgages Equity release mortgages are designed for home owners who wish to release the equity within their property but to retain full ownership of their property. Unlike home reversion plans you do not sell your property to the plan provider but arrange a deferred interest mortgage. The advantage of an equity release mortgage is that you and or your dependents are able to benefit from the potential future growth in the value of your home. This means if property prices increase you can apply to release additional equity in your home, or pass on this growth to your dependents. The disadvantage of an equity release mortgage is that you will normally receive a lower initial lump sum than the sum available from a home reversion plan provider. Key
Features of Equity Release Mortgages The amount of equity you can release under an equity release mortgage will depend upon your age, the value of your property and the underlying interest rate available from the mortgage lender. Equity release mortgages are arranged as deferred interest only mortgages and are available on variable and fixed interest rates. A deferred interest only mortgage means you make no interest or capital repayments to the plan provider. The actual level of interest is rolled up and added to the amount of equity released. This total is then repaid to the plan provider when your property is eventually sold. Equity release mortgages normally offer a choice of a tax free lump sum or a guaranteed regular monthly income, or a mixture of both. Some plan providers offer flexible equity release mortgages. The plan provider will set a maximum level of equity they are willing to release, and allow you to drawn down lump sums, as and when required, up to this maximum level. A flexible equity release mortgage means you only accrue interest on the actual level of money advanced to you. Equity release mortgages are available from age 55. Most plan providers do not impose an upper age limit, and will release a greater percentage of the value of the house for older applicants. All
providers who offer equity release mortgages and are members
of the Safe
Home Income Plan scheme provide a
no negative equity guarantee. This guarantees that regardless
of the fluctuations in UK mortgage interest rates, regardless
of the amount of interest that is owed and regardless of how
long you live you will always be guaranteed ownership of your
house until you die. |