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If you own your own home then equity release is often highlighted as a quick and easy way to release some of the capital tied up in it. It is offered to those aged 55 and over and is designed to be a way to re-access some of the value in the property. As equity release is tax free it is a very attractive option for those who may need to create some cash flow. There are several products that now come under the equity release umbrella, from those that offer a lump sum to equity release you can receive in regular, smaller payments. Equity release is a big decision – and there can be substantial costs involved – so it’s important to ensure you have all the facts before you make a decision.
A lifetime mortgage means that you retain ownership of the property. Just like a regular mortgage you can opt to make monthly repayments on what you’ve borrowed. Alternatively, you can simply allow the interest to roll up. If you do the latter, the property will be sold when you die – or go into care – and the mortgage repaid from the proceeds.
Home reversion means that ownership of your property passes to the lender in exchange for regular payments to you and the right to live there until you die. The main obligations to bear in mind for home reversion are the requirements to insure the property and also to maintain it.
Both options for equity release offer the opportunity to ring fence a proportion of the value of the property so that this can be set aside for a specific purpose, such as inheritance.
Equity release is certainly not right for everyone and there are “horror stories” where things have gone wrong. Tread carefully.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read about Amanda Gillam
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