There are times in a person’s life, especially after retirement, when one is devoid of any steady income and is left with just some chattels such your house, jewellery & memories. Under such circumstances, when one requires some money or wishes to improve retirement income, then why not consider as a last resort a re-mortgage of your property. While still able to utilize the property, you can obtain a regular flow of income or a lump sum of amount in lieu of the value of the property. Such deals are now being offered by many equity release companies across the UK.
There are many equity release schemes related to such deals. It is absolutely essential for you to understand each and every deal available in the market as this may be your biggest monetary deal pertaining to whatever property you have in hand. First of all, get advice! There are equity release advisers in the UK that are qualified and have passed exams in order to provide advice to senior citizens in this field. Then with your independent equity release adviser you can look for schemes which offer free valuation of your property; maybe cash-back deals and discounted interest rates would be added jewels in the crown.
There are two main types of equity release deals to be aware of and they are the Lifetime mortgage and Home reversion plans.
Lifetime mortgage plan: This is plan of a lifelong mortgage where you get the option of paying the interest on a monthly basis, or not. Here you still have 100% ownership rights to the property and acts the same way as a normal residential mortgage, but with the option of making monthly payments, or not.
Home reversion: Here you will have to sell, a part or whole, of your property to be able to get a lump sum, regular income or both. Thus, the cash provider becomes the co-owner of the property, however you do have the protection of a lifetime tenancy agreement to remain in the property for life.
In addition, there are sub-types of lifetime mortgages. They are:-
a) Lifetime Flexible Drawdown Plans – where you get a fixed rate of interest throughout your life and get provided with a cash facility based on your age and the value of the property. This allows you to take withdrawals in the future with NO further set up costs
b) Downsizing Protection Plans – where you don’t have to pay early repayment if you move home after 5 years while downsizing to a smaller property.
c) Exclusive Tailor-Made Plans – where some equity release brokers, due to their volumes of business can negotiate and get upto £1000 cashback deals and also a free valuation offer.
But before selecting any of the above schemes, make sure to get your Key Facts Illustration. Such equity release quotes would provide you with all the details of individual schemes in detail covering the costs, interest rates, early repayment charges and the necessary points to note. You would be in a better position to decide upon the scheme with which you would like to go with upon reading one of these FSA regulated documents.
Last but not the least; ask for a free Equity Release Calculation that would allow you to know the maximum release based on the market valuation of your property. They would also advice you of the amount of tax free cash that you can get on mortgaging your property which will enable you to draw up your spending plans concisely.