As you get older, the time comes to make more decisions that are all designed to give you the best quality of life possible. You don’t want to find yourself unable to make these decisions, because they directly affect the quality of life that you’re going to enjoy. If you’ve worked hard your whole life to enjoy a home, then you’re going to need to start thinking about trying to figure out an option that’s going to allow you to enjoy your home to the fullest.
Many homeowners in the UK have worked hard to actually pay off their mortgages. Yet they’re left with a problem — they still owe bills. They still have things that need to be taken care of. This means that you will need to still need to make sure that your expenses are covered.
Trying to figure out the equity relapse market can take some getting used to. There’s a few different ways to make everything come together.
The two main types of equity release schemes available in the market are the lifetime mortgage and the home reversion plan. The lifetime mortgage involves taking out a brand new loan secured on your property, while the home reversion plan involves selling a share of ownership in the property.
The right plan depends on what you’re actually trying to achieve. You need to figure out how much money you can raise through either scheme, what will be left for your heirs, and what impact that dying earlier or living longer than expected can have. You will also need to think about the impact of inflation on your circumstances, which would include your income and the value of your property.
Many homeowners in the UK go with the lifetime mortgage option, because it allows them to often get a lot more money than the home reversion option.
Lifetime mortgages are straightforward. As mentioned before, you will be taking out a new loan secured on your property. You don’t have to make any repayments while you are alive. Instead, the interest is rolled up to be paid when the scheme is ended — if you pass away or move into long-term care, your house is sold and the amount that’s borrowed (including interest) is paid to the lender. After the costs, anything left over is passed to the estate at large.
You can check into lifetime mortgages with confidence, considering that they are regulated by the Financial Services Authority.
The top advantages of a lifetime mortgage is that you get a lump sum or a monthly income for the rest of your life. This money is secured as a mortgage against the property. You need to pay nothing while you live at the property.
These loans are often fixed-interest, so there’s no worry that your costs are going to drive up. Unlike in the US, the UK equity release scheme can be available to people as young as 55. There are also staged payment options available as well.
However, there are some cons that you will need to think about. For starters, the interest can mount up very fast, and it will reduce what your family will inherit. Your family could easily end up with nothing from the sale proceeds. So if providing for your family after you pass away is important, you will need to make sure that you have this taken care of.
You will not be able to get a top-up loan later in most circumstances. Less money is available than what you would receive with a home reversion plan, but this is not always the case.
You will also need to make sure that your tax position as well as benefits that you receive from the state are not affected. Talk to an independent specialist that only deals with equity release. They will explain it all to you with more specific information — this is just general financial advice.
Now is definitely the time to start thinking about an equity release scheme. If 2011 wasn’t the year that you expected or wanted, you have a fresh New Year to begin making all of the right moves — check it out for yourself!