Equity Release Mortgage Schemes
If you need a lump sum of money, for example to help your children buy a first home, or help to provide you with income or capital during your retirement, then equity release is an opotion you may wish to consider. Before embarking on this route make sure you take professional advice and discuss it with your family first.
The most popular type of equity release is a lifetime mortgage. The interest on the loan, which is usually fixed and at a higher rate than on a standard mortgage, accumulates over the equity releasers lifetime. No repayments are due when you are alive. Instead the loan is repaid on your death after which time the house must be sold, typically within a year. All schemes regulated by industry body, carry a no negative equity guarantee i.e. you will never owe more than the value of your home.
However, even if you took a lifetime mortgage on just 25 per cent of your home, this still means that your beneficiaries could be left with nothing if you go on to live a long time.
Variations to the above scheme are available which allow you to make regular interest only payments on the liability, thereby potentially negating the negative impact of compound interest accumulation.
The other form of equity release, home reversion plans, involve selling a proportion of your property to a finance provider, usually at a discount to the market value. Upon death or sale of the property the finance provider takes a proportionate sum representing their percentage share of the property. However, they are not as popular as lifetime mortgages due to current low interest rates.