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Equity Release - for a worry free retirement

Equity release products are becoming popular as a way to provide more financial flexibility and comfort during retirement.

There are two main Equity Release options: Home Reversion, where you can sell a share of your home, or a Reverse Equity Mortgage, which allows you to borrow against your home's value. These solutions aim to help retirees who are 'asset rich but cash poor' to have a more comfortable retirement.

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The products have advantages and disadvantages. We provide unbiased information to assist retirees and their families when considering potential asset utilisation options for a better retirement. This includes funding for lifestyle, immediate financial needs (e.g., health), and basic expenses like rates, utilities, and insurance.
These options are a reverse equity mortgage and a home reversion scheme.

Is a Reverse Equity Mortgage Right For You?

A reverse equity mortgage allows homeowners to borrow funds using their home as security without having to sell it. The loan is repayable when the house is sold, with interest charges accumulating over time.

  • Some Pros:
    Tax-free cash enhances retirement comfort.
    Lifetime occupation rights in your home.
    No immediate payments; interest cost added to the loan balance (also a con if not used sensibly).
    No negative equity guarantee: never owe more than home's worth.
    You still benefit from increases in property value as owner.
    Flexible drawdown options: lump sum, regular advances, or line of credit.
  • Some Cons:
    Variable interest rates; unknown retained home equity.
    Higher rates for reverse equity mortgages than normal mortgages.
    Compounding interest.
    Borrowing limits and restrictions on eligible regions/property types
    Can carry upfront fees (though typically capitalised into the loan).

Is a Home Reversion Sale Right For You?

A home reversion scheme enables homeowners to sell a portion of their property to a plan provider in exchange for a tax-free lump sum or regular payments. This makes them a co-owner but allows them to live in the property for the rest of their life. Unlike a reverse equity mortgage, there is no debt involved, and the amount of equity sold and retained is agreed upon in advance.

  • Some Pros:
    Home reversion allows selling part of home equity for a capital sum or income stream, without incurring debt.
    Provides tax-free cash to enhance retirement comfort.
    Guarantees lifetime occupation rights, with no need to move or downsize.
    No interest payments; not a loan, thus unaffected by higher interest rates.
    Co-ownership still allows sharing in property value increases.
    Option to ring-fence a portion of the property for guaranteed inheritance.
  • Some Cons:
    No longer 100% ownership of your home; must pay the provider their share upon selling.
    Rebuying the home requires paying full market value if you change your mind.
    Selling the property won't yield its full market value.
    No benefit from price rises on the portion of the home sold.
    Reduced inheritance for beneficiaries due to partial property sale.
    Can have upfront fees.

Get in touch; Hallam Jones can guide you through everything you need to know about equity Release. 😊