FINANCE
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50 PLUS MAGAZINE
Also check whether you have the right to remain in your property for life or until you need to move to long-term care, provided the property remains your main residence and you abide by the terms and conditions of your contract. It’s worth checking whether you have the right to move to another property, subject to the new property being acceptable to your product provider as continuing security for your equity release loan and whether the product has a “no negative equity guarantee”.You will also need to know what level of maintenance you’ll be expected to carry out and how often your property will be inspected – this could be every few years.
A SECURE FUTURE WITH
EQUITY RELEASE? THESE days we have to look at a variety of ways to raise cash and ensure that our future will be secure and one popular way for anyone over 55 to do just that is via equity release, with research carried out by the Equity Release Council showing that 72% of homeowners over 45 questioned wanted to stay in their property for as long as possible, with 41% also looking to invest in home improvements. Equity release offers the chance to access the cash – the equity – tied up in your home, which can be released either as a lump sum or in several small amounts, or a combination of both. There are two equity release options: a home reversion and a lifetime mortgage. A HOME REVERSION involves you selling part or all of your home to a home reversion provider in return for a lump sum or regular payments.You have the right to continue living in the property until you die, rent-free, but you have to agree to maintain and insure it.
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You can ring-fence a percentage of your property for later use, possibly for inheritance - the percentage you retain will always remain the same, regardless of the change in property values, unless you decide to take further cash releases. At the end of the plan, your property is sold and the sale proceeds are shared according to the remaining proportions of ownership. You will get a lump sum or regular payments – normally between 20 per cent and 60 per cent of the market value of your home, or the part you sell. With home reversions, it’s worth checking whether or not you can release equity in several payments or in one lump sum and the minimum age at which you can take out a home reversion plan. Some providers insist you’re at least 60 or 65 before you can apply. Keep in mind the percentage of the market value you will receive. This will increase the older you are when you take out the plan but might vary from provider to provider.
The Money Advice Service explains that a LIFETIME MORTGAGE means that you take out a mortgage secured on your property, provided it is your main residence, while retaining ownership. You may be able to ring-fence some of the value of your property as an inheritance for your family or you can choose to make repayments or let the interest roll-up. The loan amount and any accrued interest is paid back when you die or when you move into long-term care. Most people who take out equity release use a lifetime mortgage. Usually you don’t have to make any repayments while you’re alive and interest “rolls up” (unpaid interest is added to the loan), meaning the debt can increase quite quickly over a period of time. However, some lifetime mortgages do now offer the option to pay all or some of the interest. Some will let you pay off the interest and the capital. In the same way ordinary mortgages vary from lender to lender, so do lifetime mortgages, and if you’re looking at this option it’s worth knowing that the minimum age for this is usually 55. As we’re now all living longer, the earlier you start the more this is likely to cost in the long run.
