Trying to make your retirement a little sweeter is the subject of a lot of guides, and for good reason. If you’ve worked hard all of your life the last thing that you honestly want to do is find that you really can’t provide for yourself after working so hard for so many years. There is something to be said about going beyond just living — you want to thrive and you want to be able to have a good time. It’s going to be up to you to look through any and all resources that you can use for this purpose. We really like equity release schemes, but we find that people really don’t know as much about these schemes as they would like to believe.
So this guide covers much of the high points of these schemes.
One of the first things that you need to know is that all equity release plans are going to reduce the overall value of your estate. So your surviving heirs will not receive as much for an inheritance as they might have — but if you already let your family members know upfront what you’re doing, they can actually plan ahead and still take care of themselves. These are pretty serious decisions that you should honestly make as a family rather than just assuming you must keep it a secret.
If you are entitled to state benefits, you will need to make sure that the equity release doesn’t affect this at all. This is something that you’re going to be doing for a lifetime, which means that there are some penalties for paying the loan back in full.
If you move into a long term care facility, you will have to repay the loan at this time. It can be done through the sale of your home, but it’s up to you.
The good part of equity release schemes is that you really don’t have to leave your home if that’s not what you want to honestly do. It can be better to stay in the home that you bought all of those years ago and tap into the equity than to have to move around. You get to keep your home, and there are no monthly repayments to meet.
Make sure that you go with plans that are SHIP approved — this stands for Safe Home income Plans. This guarantees that you don’t fall into negative equity and you can move home if you wish. If you want to stay in your home for life, you can do this as well.
The two top types of equity release out there are lifetime mortgages and home reversion plans.
The lifetime mortgage is definitely the most popular, because it allows you to receive a tax-free cash lump sum, and there’s no monthly payment schedule to have to deal with. You get to truly stay in your home for life — this is not a gimmick of any kind.
If you want to move and take the plan with you, you can generally do this. You may even be able to protect a percentage of your property and guarantee an inheritance.
Home reversion plans are a little more complicated, as they let you sell all or a part of your home to another company in exchange for a cash lump sum of income. You can still stay in your home for life, but the plan comes to an end when the company takes its percentage share of the property. This is usually when you pass away, but it can also be when you move into long term care.
What if your circumstances change? This is something that’s definitely on everyone’s minds. If you actually do need to switch plans because something has come up, you can definitely do this as well.
A qualified adviser can go over your unique situation and give you what you really need to know in greater detail than any guide can. Keep in mind that you will need to be at least 55 years old in order to enjoy any equity release scheme. Your home also needs to be 50,000 GBP or more.