Equity Plan Release

Equity Plan Release

Equity plan release offers mature individuals the opportunity to raise extra income by securing a loan against the value of their property. Individuals who are qualified to apply for equity plan release must be over 55.We strive to obtain the best available equity plan release for our clients, assessing what they hope to achieve when entering the arrangement, and finding an affordable plan around these requirements.

The equity plan release provider offer capital to the borrower, which can either be spent on their intentions, or invested into an annuity. By purchasing an annuity, the borrower will have a flow of income for the remainder of their existence. The equity plan release provider is entitled to the mortgage payment, along with interest, at the end of the contract. However, the equity plan release provider may be entitled to shares in the borrower’s property, instead of the mortgage payment. The house is then sold on the market when the contract expires.

Reasons for the expiration of the equity plan release contract include death of the plan holder, or relocation of the borrower to a care institution for the rest of their life. Equity plan release schemes can be devised into two different plans, either a lifetime mortgage equity plan release or a home reversion equity plan release.

Lifetime mortgage equity plan release schemes require the borrower to pay the mortgage back at the end of the arrangement. The borrower benefits from a sum of cash along with a guarantee of residence until death in their own home. Interest rates in a lifetime mortgage equity release scheme may be variable or fixed, whilst the mortgage at a fixed rate.

There are three separate schemes based on the lifetime mortgage equity plan release; interest only, interest rollover or home income plans. Our advisers will provide detailed information on each scheme and evaluate which of the three schemes is most suitable for the client.

Interest only schemes work on the basis that the borrower does not have to pay the mortgage back to the provider until the end of the contract. However this does not exclude the borrower from paying interest rates on a monthly basis. This scheme differs from a rollover scheme, in which interest does not have to be paid every month. Interest is alternatively calculated monthly and added onto the total debt of the mortgage. Home income plan schemes provide borrowers with a cash sum, in order to obtain an annuity. The borrower uses this annuity to contribute to monthly payments of the mortgage along with fixed interest.

Home reversion equity plan release schemes differ from lifetime mortgage equity plan release. There are no monthly fees the borrower has to contribute to and the borrower is also guaranteed occupancy in their home until death. Along with this, the borrower receives a cash sum, which is used to buy an annuity. In exchange, the provider of the home reversion equity plan release is entitled to a proportion (part home reversion) or all of the shares (full home reversion) in the house.

One of the benefits of a home reversion equity plan release is that the borrower will not have to make any monthly payments to the provider.
In contrast to this, the borrower does not retain full ownership of their property and the property is sold after the death of the borrower.

Potential equity plan release holders must be aware that an equity plan release scheme should only be considered if the borrower knows what he/she wishes to spend their newly generated capital on.  Equity plan release schemes often lead to unwanted debts or the sale of the property after the death of the plan holder, so the arrangement of an equity release plan must be discussed throughout the family. Our expert team of advisers are able to assist with any concerns you have regarding equity plan release schemes, advising on whether equity plan release is complimentary to your plans for the future.

Considering an equity plan release? Contact one of our specialist advisers today.

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