Equity release

Equity Release Mortgages:

• Lifetime mortgages, with this type of scheme you borrow money from a lender. Most schemes do not require any payments during your lifetime.
  

• You do not pay off any interest or capital until your property is sold. The interest builds up year after year and is added to the amount of the loan. A rolled-up interest loan will usually be based on a fixed interest rate rather than a variable one. This protects against any interest rate increases in the future. However you should expect the rate to be higher than a conventional mortgage.
  

• Interest can compound quite quickly and if property prices stagnate it is possible that you could use up all your equity. For that reason we always advise clients to take out a plan with a no-negative equity guarantee.

• Reversion schemes, under this type of scheme you sell or a proportion of your home to a provider. While you no longer fully own your home, you continue to live there as a tenant of the part you sell, rent free, for the rest of your life.

• You can choose to receive a cash lump sum, or a monthly income, or both. When you take out a reversion scheme you will not receive the full 'market value' of the property you sell, but a percentage of it according to your age, health and sex. The older you are the more you will be paid. If you are in poor health you may be able to raise more.
  

• When the property is sold on your death, the provider receives a proportionate share of the proceeds. For example if you sold 30% of the property, they will get 30% of the proceeds.
  Note that the provider gains twice - once by not paying you the full value of what they buy and then again by keeping their proportion of any gain.