Equity Release - what are the options?

Recently the popularity of equity release schemes has grown as many retired people find they are asset rich (ie have a mortgage free home) but cash poor. An equity release or lifetime mortgage can enable them to release cash from their home to boost their finances in retirement, without the need to move.

In today’s Equity Release market, four main schemes are available:-

LIFETIME MORTGAGES

A loan is secured on the property to provide a lump sum or regular income, with no monthly payments to meet.Interest is added to the loan throughout the owner’s lifetime at a fixed or variable rate. The loan plus interest is paid back when the home is sold.

DRAWDOWN PLANS

Similar to a lifetime mortgage, save that the full sum of money available is not requested immediately, but drawn down in stages. Interest is paid therefore only on the amount actually borrowed.

HOME REVERSION PLANS

The owner sells the home (or a part share) to a reversion company in exchange for a lump sum and a guaranteed lifetime lease with no monthly repayments and no rental payments.

HOME INCOME PLANS

Equity is released through a lifetime mortgage and is invested in an annuity to generate income for life. A cash lump sum can be available in addition to an income.

Anyone considering schemes should discuss it with those closest to them and should always take independent legal and financial advice before committing yourself in any way.

October 2009

Stephen Gallico Solicitors is authorised and regulated by the Solicitors Regulation Authority (Registration number: 386696).
A copy of the Solicitors’ Code of Conduct 2007, which sets out the rules of professional conduct which apply to solicitors, is available on the Solicitors Regulation Authority website: http://www.sra.org.uk.

Our professional indemnity cover is with Zurich Insurance plc of The London Underwriting Centre, 3 Minster Court, Mincing Lane, London EC3R 7DD. The territorial cover of our policy is worldwide.