A short review of equity release for over 55s
This equity release review will give a brief explanation of equity realease.
Equity release is the name given to the financial arrangement when you sell equity in your home in order to release money from your home. There are a number of financial companies who operate equity schemes to give you the opportunity of releasing money from your home.
Why take the equity release option?
In short, equity release is a way of releasing money from your home for whatever purpose you choose. A new car, early retirement, help members of your family etc. An important point is that it allows you to release money from your home without you having to move out of your home.
Equity release options
There are broadly two categories of equity release scheme.
- Lifetime Mortgages
- Home Reversion Plans
What is a lifetime mortgage? A lifetime mortgage is an option where you take a loan secured upon your house with a choice of paying monthly interest payments or not doing so.
A home reversion plan is an option in which you sell part or all of your house to the financial institution. In return, you receive a lump sum and can live in your house for the rest of your life without having to make any payments to the financial institution what so ever.
Problems with equity release
The following is an excerpt from an article published by The Guardian:
There are two main potential problems with equity release. First, it usually proves far more expensive than a traditional mortgage, as interest is, in most cases, rolled up over decades rather than repaid each month, and so reduces the sums left for legacies. Second, it restricts room for manoeuvre by the homeowner (who, for instance, has to get the product provider’s agreement if he or she wants to move house).
A link to the full article can be found here.