Equity Release
Equity Release schemes allow older homeowners to turn some of the value of their homes into a cash lump sum or regular income.
With relatively high residential property values a property often forms the greatest part of personal investments. This coupled with the continuing underprovision for retirement, has resulted in raising cash by releasing equity from a home becoming more and more popular.
In addition to generally high property prices and under investment for retirement, people are living longer and staying fitter. As a consequence many over age 60 are asset rich but income poor.
The value of property in the UK has increased dramatically in the last 8 years. Even though there may be peaks and troughs the long-term trend has largely been upwards. As a significant proportion of retirees are homeowners, homes are increasingly becoming a source of income.
There are two broad types equity release available; the lifetime mortgage scheme and the reversion scheme.
Lifetime Mortgage Scheme
The essence of a lifetime mortgage scheme is that a property is mortgaged to release capital which can be put to any use including the purchase of an annuity to provide a guaranteed income for the property owner for life. Where the property is owned by a couple then any annuity purchased would usually be on a last survivor basis.
Reversion Schemes
The basic principle behind the reversion scheme is that all or, more usually, part of the property is sold to a reversion company (usually a bank or insurance company) who in turn grants the seller the right to continue to live in the property for the remainder of the seller´s lifetime. The purchaser releases a capital sum in return for the right to the property or a part of the property as the case may be. The capital released can be used for any purpose (and in many cases the company will insist on the occupier retaining a share in the property so that there is a greater incentive to maintain the property in good order).
These are lifetime mortgages and home reversion plans. To understand their features and risks, please ask for a personalised illustration.
For advising on mortgages we can charge a fee of typically £295 or we can accept commission from the lender.
About Island IFA
Island IFA is a fully regulated independent financial planning service and a trading style of Imperial Independent Financial Advisors Ltd. Imperial Independent Financial Advisers Limited, which is authorised and regulated by the Financial Services Authority.
Further consumer information is available from the Financial Services Authority via the following link: www.moneymadeclear.fsa.gov.uk
The guidance and/or advice contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK.
The FSA do not regulate some forms of mortgages or tax planning services.
Imperial Independent Financial Advisers Ltd. Registered in England and Wales No. 05274431. Registered office Imperial House, 94 Oakley Road, Southampton Hants SO16 4LJ
