The equity, or value, you have in your home is its open market value, less any mortgage or other debt held against it. Equity release is a way of getting cash from the value of your home without having to move out of it.
With an equity release scheme, you have to be over a certain age (typically 55) and you must own your own home. You must also continue maintaining your home while you live in it.
There are two main types of equity release scheme – lifetime mortgages and home reversions.
With a lifetime mortgage you:
- Take out a loan that is secured on your home (i.e. the lender knows they can get their money back by selling your home).
- Continue to own your home, although you will have to pay back the mortgage on it.
- Repay the mortgage from the proceeds of the sale of your home when you die or if you move out (e.g. to a care home).
With a home reversion you:
- Sell all or part of your home to a reversion company or an individual.
- No longer own your home, but continue to live there as a tenant of the reversion company or individual.
- The home is sold when you die or if you move out (e.g. to a care home).
You will normally get your money as a cash lump sum to use as you wish. However, if you want an income, you have various options:
- You can invest the lump sum in an annuity or some other investment to provide a regular income (with some schemes the provider does this for you).
- Your scheme may provide a regular income that is not linked to an annuity or investment.
- Other schemes provide smaller cash sums you can take regularly or only when you need them (called draw downs).
- Some schemes combine the above features. For example, you could take a lump sum at the start and then draw down cash later.
Equity release schemes are complex and you should always take professional advice before making any commitment.
Macleod & MacCallum are able to offer a full advice and arrangement service to customers considering the release of equity in their home. As independent advisers we can source suitable equity release products from the whole of the market.
Mike Davidson is registered and authorised to advise on equity release products by the Financial Services Authority and is one of only a very few qualified to do so in the Highlands.
A free initial consultation is offered to interested parties. Macleod & MacCallum can also provide a presentation on equity release for group meetings. To find out more, please contact us.
Contact: Mike Davidson
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