What is equity release?
A guide to equity release schemes and the providers involved, from Bower Retirement Services
Are you in retirement, or thinking about retirement soon, and worried about your pension or income? The changes in pension plans, and the squeeze in pensions from public services, means that many UK employees in their 50s and 60s are now making extra plans for added financial security in later life.
What are the options as you retire? How can you use your home to help you secure extra cash during retirement, and maintain the upkeep of your home and your own life, as well as perhaps your partner or any other dependents?
The advice and expertise of a specialized company such as Bower Retirement Services can help you decide whether to release equity through your home, or whether there may be other options for ensuring added income through your retirement.
Today we are going to take a closer look at Equity Release and what it involves, and whether it might be right for you as you head into retirement.
What is equity release?
Equity release is the release of value or money from your home, which generates income or cash back to the homeowner, without having to move house. On the Guardian Money mini-site, they very succinctly sum it up as follows:
It's a way of getting cash out of your property without the need to move. In most cases there are no monthly repayments to make. The most common schemes are mortgage-based products secured against your home and repaid when you die or go into long-term care. But before you think about equity release, consider all the alternatives.
There are two types of equity release: lifetime mortgages and home reversion plans. Lifetime mortgages allow you to take a loan out on your home, in return for an income or a cash lump sum.
Indeed, some mortgage lenders or insurance companies will offer this type of equity release, such as Aviva, LV or Just Retirement, including the option to put the money in a separate ‘pot’ to be drawn from. As you don’t have monthly repayments the interest is rolled up into the loan on a compound basis. It is also possible to pay the interest on a monthly basis if you can afford to do so.
Home reversion plans involve selling all, or part of your home, in return for a cash sum, and the right to remain living there. Bower Retirement Services are the people to talk to before you commit yourself to one of these schemes, as they can make a significant impact on your living environment and future.
What are the other options?
Again, speak to your equity release adviser for a personal consultation on your situation. In general, it’s worth exploring the other possible avenues for income – have you considered renting out a room, or getting a lodger? Are there any housing benefits you may be entitled to? What about any other savings or assets that you may have? Collating sound independent financial advice before making a decision to sell part of your home is advisable.
For more information, visit Bower Retirement Services at: http://www.brsequity.co.uk/.