Types of equity release plans

Over recent years, the equity release industry has moved on in leaps and bounds thanks to it becoming highly regulated, as well as the introduction of new equity release products.

At Bower we are experts on both types of equity release plans – Lifetime Mortgages and Home Reversion plans.

How Do The Two Equity Release Plans Differ?

Lifetime Mortgages are the more modern and often preferable equity release plan. Available to those over 55 years of age, homeowners are able to release some much needed cash in their property to spend as they wish, whether it’s on home improvements, holidays or simply enjoying their retirement.

This type of mortgage allows you to keep full ownership of your home and doesn’t require any of the money to be paid back, until after you have entered long term care or pass away.

Home Reversion Plans are designed for those aged 60 and over and release cash in your home by selling a small percentage of the property for less than market value to an equity release provider. You still have the right to reside in your home until you go into long term care or pass away, after which the property is sold.

What Are The Key differences Between The Two Plans?

Both home reversion plans and lifetime mortgages allow you to release some of the equity tied up in your home to spend as you wish. You are also able to continue to live there, without the risk of losing your home, until the end of the plan which finishes once you pass away or move into long time residential care.

However, these two plans are actually very different products with some key distinctions between them, including;

• A lifetime mortgage loan is secured against your property.
• A home reversion plan works by selling a share (or all) of your property below market value to an equity release provider.
• With a lifetime mortgage, you remain the owner of the property.
• With home reversion plans you no longer own the entirety of the property, just the remaining share, if any.
• Lifetime mortgages don’t usually require any repayments to be made during the lifetime of the plan, unless you choose to.
• Home reversion plans allow people to remain in the home under a lifetime lease (usually rent free) for the rest of their life.
• When you take out a lifetime mortgage, you agree to a fixed interest rate which over the years builds as compound interest.
• Home reversion plans are not classed as a loan, so therefore there is no interest to build up.

Which Plan Will Be Most Suitable For Me?

Although both of these equity release schemes allow eligible homeowners to access some of their property wealth whilst being able to remain in their home, as with everything there are Advantages and disadvantages to both and it is worth taking the time to consider your options carefully before making a decision.

In terms of suitability, choosing the right plan could depend on:

• How much money you wish to access (Complete our free online equity release calculator to find out how much you could access)
• If you want to access any money at a later date with a drawdown facility
• If you plan to downsize or move in the future
• The value of your property
• If you plan to pay off all or some of the lifetime mortgage in the future
• Whether you want all the money right now
• The ages of you and your partner (if applicable)
• If you wish to guarantee an inheritance for your loved ones
• Any outstanding mortgage even a lifetime mortgage
• Your health and lifestyle (see ‘How much equity can I release?’)

At Bower we take all of these factors and more into account during our advice process where we work to help our customers make an informed decision. Only when all these factors have been discussed can a recommendation be made which may be an alternative solution to equity release.

Independent Financial Specialists You Can Trust

At Bower we use our knowledge and experience to provide our customers with the clear and impartial advice, guidance and information they need to make a decision that is right for them and their circumstances.

To find out which type of plan is best for your individual needs and circumstances, simply get in touch via our online contact form or call on – 0800 411 8668 and we’ll arrange a free, no-obligation consultation in the comfort of your own home with one of our expert advisers.