Retirement Communities Blog

Present prevailing housing market difficulties excluded, few will argue that a house will increase many times in value over a long period of occupancy. At the time you took out a mortgage on the property it seemed the repayment would last for ever and the amount of the loan was colossal; but in years to come all will be paid off and the value of the property will have dramatically risen. You will effectively be sitting on a large profit, and a way to realise some, or most of that profit is by way of home reversion equity release; here are a few things you need to know about.

The home reversion equity release provider will purchase your house, or a substantial share of it, for less than the market value, which means if you want to buy it back later you will have to pay the full market value prevailing at the time. You also have to transfer legal title of the property to the lender, though you remain living in the house effectively rent free.

Because the lender owns the house; either in entirety or a proportion of it, the value of your estate to your family is either reduced or non-existent when the property is sold on your death or admission to a long term care home.

Any tax based or means tested benefits can be affected, but the transaction is tax free.

But accepting all of the above, home reversion equity release is a quick (and sometimes the only) way to obtain a large cash lump sum, which can be spent on whatever you choose to make retirement more comfortable. If your immediate family have retirement provision of their own and are prepared to accept that they will not inherit all or part of your property then it may well be an option of realising substantial funds that you wish to consider.

Learn more about equity release schemes.

It is commonly accepted that house prices increase during a long period of ownership and that the equity in a house after such a period is usually substantial. Substantial until it is used to move up the property ladder, and if no plans are afoot to move again the equity is a nice financial legacy to whoever is named as a beneficiary in a will.

When the bricks and mortar you purchased a long time ago are today worth several multiples of what you paid for them it can be frustrating to know that you are sitting on a large sum of money; particularly so if struggling to make ends meet. An equity release plan could be a way to enable you to tap into that substantial equity; to benefit you and maybe younger family members who are also struggling fiscally.

Getting your hands on tens of thousands of pounds might seem tempting but, as with all things in life, there is a price to pay. Equity release is effectively a lifetime mortgage, and as with all mortgages there is interest to pay; though the difference with equity release is you don’t have to make any monthly payments. The equity release provider will accrue interest on a monthly basis and realise this in entirety when the property is sold; either on your death or to fund long term care.

There are several equity release providers on the market and obviously conditions differ with each, ordinarily though each specifies across the board that clearly substantially equity is in the property in question and that the contract is taken out by those of 55 years of age or over.

Equity release interest rates will be far greater than conventional mortgage rates, due to the unspecified period the lender has to wait before realising their interest. Some lenders enable you to make interest repayments during the equity release agreement, some do not, but you can make a separate arrangement to service monthly interest which you can use to pay off the final interest balance on the eventual sale of the property. An equity release plan does offer a swift, but perhaps long term costly, solution to raise a large sum if no other means are open to you.

Find out more about equity release.