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Types of Equity Release
There are two types of equity release routes to consider.
The lifetime mortgage involves borrowing money secured against the value in your home. You continue to own your home and receive a tax free lumpsum to do with as you require.
A home reversion plan means selling all or part of your home in return for a tax-free lump sum or regular income. It is important to understand the sale of your property or part of the property will be below its market value. After the sale you get to stay in your home with either a payable fee or rent free.
Types of Equity Release Schemes
Equity release plans offered on the market by providers can be separated into two types:
1.Lifetime Mortgages
2.Home Reversion Plans
Each type offers a route to release equity in your home, there are other helpful benefits that can be included in a plan these include:
Protected Equity
You may wish to guarantee a percentage of your property value is safe guarded for later in life or to leave as inheritance to your appointed beneficiaries. A benefit included in several plans are a no- negative equity guarantee or the ability to protect a fixed share of the value in your home.
Impaired Life
If you have been diagnosed or are suffering from health conditions that are impairing or may limit your life, then some providers could allow you to release more capital from the equity release plan.
Income
A feature of some equity release plans allow you to take your equity funds in the form of an income. The capital is set up to provide payments over your lifetime.
Flexible Drawdown
Having a flexible drawdown feature allows you draw on cash from your own reserved funds in a sense as and when you need or require. This method could be beneficial for generating extra funds for one of large expenses such as a special holiday, new car, or home improvements. Having this feature available can be a cheaper option as interest is only added to the amount withdrawn from the reserved funds.
Having a flexible drawdown can also be complex providing both advantages and disadvantages. It would be helpful to visit our section on flexible drawdowns to get further understanding on this.