Property Equity Release

Property Equity Release

Property equity release refers to an individual using the value of their home to generate a figure of money. Property equity release is available to individuals who exceed the age of 55 and who are seeking income or capital to contribute to their financial or private needs. We aim to seek an appropriate property equity release solution, which is complimentary to individual’s requirements and expectations.

Property equity release either consists of lifetime mortgages or home reversion plans. Lifetime mortgages grant the borrower the option of paying the entire debt of the mortgage off when the contract terminates. The contract will be terminated if the borrower dies or has to be moved into a care home, without any intention of returning to the property.

Lifetime mortgages consist of three categories, the first being an interest only lifetime mortgage. Interest only lifetime mortgages require the borrower to make monthly payments of interest, yet the mortgage can be paid at the end of the contract (at death of the borrower). Rollover mortgages are another form of lifetime mortgage, interest is calculated on a monthly basis, but may be paid back along with the mortgage at the end of the contract. Interest rates on interest only and rollover schemes can either be variable or fixed. Alternatively, home income plans enable the borrower to purchase an annuity; this is a consistent lifetime income. The income from the annuity may be used to pay off mortgage and interest off in monthly instalments. Interest is fixed on a home income plan.

Lifetime mortgages contain many benefits, for instance the plan holder does not lose ownership of their property. Moreover, equity may be left in the estate after the death of the borrower, enabling the borrower’s inheritors to benefit from this equity. Nevertheless, if interest rates were agreed to be variable, further increases in income could result in an enlarge debt, resulting in a reduction in equity left on the estate after the borrowers death. This could be very problematic, especially for younger borrowers, as a higher life expectancy would indicate more years for debt to roll up. If you require additional advice on the pros and cons of lifetime mortgages, our specialist advisers are able to provide professional advice on lifetime property equity release.

Home reversion plans slightly differ to lifetime mortgages. Instead of the plan holder eventually paying back the mortgage and interest accrued, the provider is authorised to a share in the plan holder’s property. A full home reversion plan enables the provider of the property equity release to gain 100% worth of shares within the property, whilst a part home reversion plan allows the current homeowner to retain a proportion of the property. In return, the plan holder receives a lump sum of cash together with a lifetime guarantee of residency to the property. The property is usually sold at a market rent after the death of the borrower, enabling the provider to benefit from the full proceeds on a full home reversion plan. This differs from a partial home reversion plan, where the inheritors still gain a proportion of the proceeds as well on a part home reversion plan.

Strengths of arranging a home reversion plan include the borrower’s certainty on the future of his life, and that of the property. Also, the borrower does not need to make any monthly payments to the provider of the property equity release, giving them the liberty to spend the money at their own will. However, the borrower concedes full ownership of their property to the provider, preventing them from having any further input into the future of the property.

If you feel a property equity release solution could potentially be an ideal option to raise capital or income, you must have an awareness of the potential risks that accompany property equity release. Our advisers are committed to seek the ideal form of property equity release for each of our clients. We strive to find a plan, which will support their financial requests, as well as personal requirements.

For more information on property equity release call us today.

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This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.