What’s the difference between equity release plans?

14/07/2022

There are a growing number of homeowners aged 55 and over who are looking into equity release as a viable way to help their finances. Whether it’s to support their grandchildren with university fees or to help with the rising cost of living, releasing equity from your home can give you a financial boost in retirement.

With the rising popularity of equity release, a variety of modern products and flexible solutions have appeared on the market, some including the option to access your money in stages and others offering an inheritance guarantee for your loved ones.

There are two main types of equity release products; Home Reversion Plans and Lifetime Mortgages.

Home Reversion Plans – what are they?

The less popular Home Reversion option, where you sell all or part of your home in exchange for regular income or a cash lump sum, lets you retain your home rent-free for as long as you choose. When you die or enter long-term care, your house will be sold and the reversion company will take its share. Usually, you sell between 25% and 100% of your home for less than market value.

If you only sell part of your home, then the rest of your share will go to your beneficiaries. 

How do Lifetime Mortgages differ?

Alternatively, a Lifetime Mortgage allows you to retain full ownership of your home and borrow against the value of your property. Many customers are interested in this particular type of equity release as you are not required to make monthly payments, and you can fix the equity release interest rate for the rest of your mortgage.

Every equity release mortgage comes with a no-negative equity guarantee, which ensures you never end up owing more than the value of your home. You will retain 100% ownership of your property until you die or move into long-term care.

Which Equity Release plan is best for me?

At B-Advised, we recognise that every individual situation is different, so within your free initial consultation, we will help you work out which financial solution best fits your later life aspirations. There is no obligation to go ahead with an equity release product and we will talk you through the alternatives.

Get in touch with us today for a free discussion with one of our specialist advisers.