Choosing to Release Equity in Your Home


Posted on: 28 November 2014 by Vickie Harrison

The financial burden of choosing or needing to retire can be a big one, so it’s important to consider all of your options carefully. Here are some things to consider when looking at releasing equity in your home.


Now your children have flown the nest and you just need space for yourself downsizing and moving to smaller home is a great way to unlock equity, without the risk and commitment of an equity release plan. Selling your home with an agent like Morgan Randall can be a way to do this and ease the financial burden so you can enjoy your retirement. With house prices growing once more you could get a lovely home for part of the cost of your current larger property, leaving you with money left over to add to the retirement fund.

Equity Release Plans

Equity release plans are one option to unlock equity from your home, either by providing you with regular monthly payments or one lump sum. Usually you can release part or all of the value of your home, and continue to live there without having to make any repayments. As you approach retirement you’re likely to have repaid your mortgage and own your home outright, so when your retirement fund isn’t very big the money tied up in your property can be a tempting source to tap into. Usually there are two types of equity release plan - lifetime mortgages, and home reversion plans.

Lifetime Mortgages

A lifetime mortgage allows you to borrow a percentage of the value of your home and will need to be repaid when you die or when you sell your home to move into residential care. Interest is charged on the amount of the loan throughout the loan period. Usually you can choose either to take a lump sum or an income, and you retain ownership of your home so if house prices increase this is reflected when you do come to sell up. However, a lifetime mortgage will negatively affect any potential inheritance you wish to leave – so it’s worth considering carefully and discussing with your family.

Home Reversion Schemes

Unlike a lifetime mortgage, you don’t retain ownership of your home with a home reversion scheme – but instead you’re granted a lifetime lease to stay in your home until you pass away. The reversion company buys a stake of your home at under market value and benefits from any increase in house prices throughout your lifetime. Also unlike lifetime mortgages, you can leave a specific stake in your property as an inheritance – so could be a good option if you need to release funds but still want to leave something behind.

Choose Carefully

No matter what you choose to do, all of these options come with their own risks and rewards – so take your time and make sure what you’re choosing to do is right for you and your family.

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