Equity Release Schemes Can Provide That Much Needed Cash In Retirement

Equity release is basically a way that you can borrow against the value of your home. Although not for everyone, they can be very helpful if you find yourself short of money in retirement. This is a simple explanation of how this can work.

Equity refers to the value of your home minus whatever mortgage or debt that is already held against it. By using equity release, you can get cash from that value but still continue to live in your home. To take advantage of an equity release scheme, there is an age requirement. Typically, you need to be over 55 years of age.

Equity release comes in two basic forms, a lifetime mortgage or a home reversion. With a lifetime mortgage, the home is the security for the loan. The mortgage does not require payment, but instead the interest is rolled up against the loan. Should you move out of the home or die, it will be sold to pay off the mortgage plus accrued interest.

With a home reversion, you sell either all or part of your home. You continue to reside there but you are a tenant of the company or person who purchased the property. The home is then sold when you move out or die. If you have not sold 100% of the property the remaining equity will form part of your estate.

You can choose to get the money from the equity release as a lump sum of cash or as a regular income. If you prefer an income, there are some different options you can consider. One is to invest the cash you received as a lump sum into an annuity that provides regular payments. The other is to take an initial lump sum followed by smaller payments as and when required, up to a total amount agreed at the begining of the process. In some instances it may be possible to arrange both a lump sum and a smaller ongoing monthly payment.

There is a lot to consider before deciding to take advantage of an equity release scheme. For one thing, you should know how your State benefits, if you will receive any, as well as your taxes will be affected. Your future ability to purchase a smaller home should you so desire or for going into a long-term facility may also be restricted.

Compare all your possibility returns on investment with home reversions or lifetime mortgages and other potential income streams. Will the selling of your home be worth it? Are the risks acceptable compared to your return and also as compared to other investment possibilities such as bank accounts? What will be the effect on your beneficiaries?

The decision to engage in an equity release scheme is a complicated one and you will need to consider many factors. You are best off discussing it with someone who really knows how they work and can advise you in your particular situation. Go over all the potential future outcomes especially upon your death or need to move into long-term care so your decision is an informed one.

Before making a decision about equity release and whether an equity release scheme is right for you., take advantage of some free equity release advice