There are many options when it comes to programmes to help you get the money you need. This is especially true when you are at retirement age or near to it. Looking into all the available options can help you ensure that your retirement is the way you want it to be. When it comes to personal finance and mortgages you have choices available to you as you own a home. Depending on how much equity there is in the home will determine what can be done when it comes to getting the money you want and need for retirement.
Release of Equity for Retirees
One option you may have heard of is to do an equity release scheme. Often these can be the best choice to get the money you need when it comes to retirement. It allows the borrower to receive a lump sum pay out, monthly payments for a predetermined amount of time or a combination of both.
With equity release you do not lose your home either. You still own the home, so there is no concern of not having somewhere to live or needing a place to go. An equity release programme may work, as there are no payments to make either.
Delving into Equity Plans
An equity release scheme is actually made up of numerous choices that allow you to choose the best option for you. Home reversion is a type of equity release in which you do sell some of your home. You sell it to an investor willing to wait until you move out or die. They provide you with equity and a lifetime tenancy agreement ensuring you can live rent free in your retirement. The funds are a smaller amount than you would get for a full home sale without a third party because the investment is in the difference of home value to what you were paid, plus any appreciation the house undergoes.
For most the idea of selling their home even in part is not an option. If this sounds like you then looking into lifetime mortgages is your best option when it comes to personal finance and mortgages.
Lifetime Equity Release Schemes Defined
Lifetime mortgages as already mentioned above do not require you to make a payment and they are offered in a couple of different ways. Now taking a look at these in detail can help your decision.
• Lump sum: this is a type of mortgage where you receive a lump sum of tax free cash designed to provide you with equity while the interest accrues onto your loan until you make repayment at death or because you wish to move to a care facility. With a lump sum you have the maximum amount of equity in the home provided to you based on your age and home value.
• Enhanced lump sum: enhanced, impaired, or ill health lifetime mortgages offer more money in a lump sum payment than the standard lump sum option. This is due to ill health which is considered an issue with your life expectancy. The mortgage company assumes they will receive the mortgage repayment and interest a lot earlier than if you were health, so they offer more money to help you during your shorter life.
• Drawdown: with this lifetime mortgage you have an account you can draw from. You choose a lump sum for the first 12 months, then after that first year you can withdraw from the account as you need it. This helps you keep funds available without having easy access like the lump sum would be. Additionally, the interest only adds up on the funds you have used and not the full equity made available in the account.
• Interest Only: an interest only mortgage in at any age will allow you to pay off the interest as you go along in the mortgage. It is the only lifetime mortgage that requires you to make a payment each month. You do not repay the capital, but neither does the capital increase because you are paying off the interest that normally compounds increasing what you ultimately owe on the loan.
Doing an equity release may work for some people, depending on the amount of equity in the home, the home’s value, as well as how old the borrower is. You want to look through all the available options with the programme to see if it will work for you by speaking with qualified specialists in personal finance and mortgages.