If you have paid off all of your mortgage and are looking for ways to make your retirement more enjoyable, you may want to consider releasing some of these tied-up funds in an equity release scheme.
Home reversion plans are one way of releasing your home equity and they are sometimes known as ‘home for life plans.’ Read this guide to find out more about how these schemes work.
If you own your home outright, those who apply for a Home Reversion Schemes are agreeing to sell all or part of their home to a lender, who, in exchange, can offer the homeowner a cash lump sum or a regular monthly income. Those who take up the scheme can still live in their home, rent-free, and do whatever they wish with the mortgage funds released. Transfer of the property ownership only occurs upon the death of both homeowners, or their entry into long-term care.
If you would like to find out about other methods for releasing cash from your mortgage, check out our Guide to Releasing Equity.
As you are selling a percentage of your house, upon your death or entry into long-time care, it can be difficult to pinpoint the exact cost of the Home Reversion Plan, when you take it out. In many cases, to minimise the risk to lenders, the property will likely be sold for less than its true market value.
If you are an older customer, say over 70 years old, the share in the home the provider will require may be less than what they would seek from younger applicants.
Max and Audrey are 65 years old and have a fully paid up mortgage on their £240,000 home. They are looking at Home Reversion Plans, to release some of these funds for a Caribbean cruise. They have found that they can release 20% of their home’s value (£48,000) in exchange for selling 70% of their home’s value to a Home Reversion Plan provider (worth £168,000 payable on both Max and Audrey’s death).
Home reversion plans, like other equity release products, incur significant risk to customers. It is, therefore, vital that you seek out independent financial advice from a trusted source.
Get in touch with an advisor today. They can offer you a free, no-obligation quote and advice.
You may also wish to take a look at some frequently asked questions about equity release, here.
I need a little help to understand the process. The adviser guided me through everything and was happy to have my family present during the meetings.
Bill Westwood, London
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATION EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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