Home Income Plan
Both lifetime mortgages and home reversion plans can offer equity release in the form of a home income plan.
The equity funds are automatically invested into an annuity built into your chosen plan, to generate income for a lifetime. A cash lumpsum can sometimes be available in addition to the income however the amount can be limited.
How does it work?
An annuity scheme provides a series of payments in replacement for a cash lump sum. The income generated from the annuity will depend on the current rates available, the plan holders age and gender.
The advantages and disadvantages of home income plans primarily depend on whether the money is released through a lifetime mortgage or a reversion plan, however annuities have their own set of benefits and drawbacks to consider outlines below.
Advantages
- Income paid from the annuity will be paid for as long as you live.
- Income can be requested on a level or increasing amount each year.
- Home income plan annuities usually provide a greater income than a standalone annuity
- A lumpsum may be available in addition to the annuity income.
- You will receive a higher income the older you are
- Interest is repaid automatically on your plan resulting in a reduction minimisation of your home value
Disadvantages
- Once you commit to an annuity for extra income you cannot undo the process
- Unless you plan offers a protection on your funds, you can lose out if you were to die early during the term of the income plan
- As you will continue to pay interest from your annuity it may not improve your financial situation like an interest roll up
- Downsizing to a smaller property may be more cost effective in the long term as long-term borrowing on your home can become expensive.
- Tax position and benefit entitlement need to be taken into consideration and any impact a home income plan could have.