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There are many different equity release schemes available that allow older homeowners to access their property wealth without having to move. Some offer the flexibility to make regular interest repayments, some allow you to access the money as and when you need it, and others allow you to pass on a guaranteed inheritance.
Lifetime mortgages have evolved in recent years to offer you greater flexibility in the way you access your money and make payments. As a result, a variety of lifetime mortgage plans have emerged.
A standard lifetime mortgage is a loan secured against your home which provides you with a tax-free cash lump sum and no required monthly repayments. As with all types of lifetime mortgage, you retain 100 per cent homeownership.
Compound interest is added throughout your lifetime and, once the last deed-holder passes away or enters long-term care, the loan plus interest is repaid through the sale of your home. You can typically release 18–50 per cent of your home’s value, depending on your age and health.
All lifetime mortgages approved by the Equity Release Council come with a no-negative-equity guarantee, which means you will never owe more than the value of your property.
Interest only lifetime mortgages
These plans allow you to make monthly interest repayments to help keep the overall cost of the loan down. You can even fix the interest rate for the life of the loan.
Enhanced lifetime mortgages
Enhanced lifetime mortgages are designed for those with medical conditions, and enable you to release more money compared to a standard lifetime mortgage. If you have health problems, such as diabetes or high blood pressure, or you’re a smoker, you may qualify for an enhanced plan.
Protected lifetime mortgages
Protected lifetime mortgages allow you to guarantee an inheritance for your beneficiaries by protecting a percentage of the value of your property. However, by ring-fencing some of the value of your home, you reduce the amount of equity available. If you ring-fence 20 per cent, for example, your loan will typically fall by the same percentage.
Home reversion plans
Home reversion plans are now much less common than lifetime mortgages, accounting for less than one per cent of the market. With a home reversion plan, you sell all or part of your home in exchange for a tax-free cash lump sum or a regular income, with the right to stay in your home – rent free – for as long as you choose.
When you pass away or enter long-term care, your house will be sold, and the reversion company will take its share of the proceeds. If you sold the whole property, all of the proceeds will go to the company; if you only sold a percentage, they will take this and the rest will go to your beneficiaries.
equityreleaseadvice.info helps people compare the hundreds of different equity release schemes and the thousands of different equity release options in one place.
It also provides access to Impartial Independent financial advice about equity release from fully regulated Financial Services Authority approved Financial Advisers.