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About Equity Release
There are three main types of Equity Release:
1. Equity Release Lifetime Mortgage 2. Lifetime Drawdown Mortgage 3. Home Reversion Plan
Equity Release Lifetime Mortgage
An Equity Release Lifetime Mortgage works in a similar way to a normal mortgage. A loan is taken out, and you use the value of your home as security for borrowing the money. The difference between a normal mortgage and the Equity Release Lifetime Mortgage is that there are no monthly payments. The loan ( plus interest ) is repaid from the sale of your house when you either die or go into long term care. If you are a couple, it is until the last surviving member passes away or goes into long term care.
Lifetime Drawdown Mortgage
The Lifetime Drawdown Mortgage is very similar to the Lifetime Mortgage above, however instead of a lump sum of money in one go, you can take smaller amounts when you need it. Interest is only charged on the amounts borrowed.
There are various different ways this plan can work when offered by different providers, so it's best to speak to your advisor about it. This can plan can be very useful if you receive state benefits, as sometimes if you receive too much money, you may loose your benefit.
Home Reversion Plan
With a Home Reversion Plan, the provider purchases either a percentage, or all of your home from you. You get a lifetime lease, so you can stay in your home as long as you live, rent free. When you pass away the home is sold, and money equal to the percentage that the provider purchases, is taken by the provider. Any remaining money is then left for your beneficiaries.
The younger you are, the less money you are likely to receive from this plan. The reason for this is, it is thought that would be living in the home for a longer period of time.
