There are two equity release options:
Lifetime mortgage: you take out a mortgage secured on your property provided it is your main residence, while retaining ownership. You can choose to ring-fence some of the value of your property as an inheritance for your family. You can choose to make repayments or let the interest roll-up. The loan amount and any accrued interest is paid back when you die or when you move into long-term care.
Home reversion: you sell part or all of your home to a home reversion provider in return for a lump sum or regular payments. You have the right to continue living in the property until you die, rent free, but you have to agree to maintain and insure it. You can ring-fence a percentage of your property for later use, possibly for inheritance. The percentage you retain will always remain the same regardless of the change in property values, unless you decide to take further cash releases. At the end of the plan your property is sold and the sale proceeds are shared according to the remaining proportions of ownership.
To help you evaluate the options here are some case studies.
Married in their late teens, retired bus driver John (67) and former shop worker Beryl(68) bought their house in Leeds, for £30,000 not long into their marriage. Their two children now have families of their own, and live nearby.
- Mid to late 60s
- 2 Children
- Low savings and pension
Mindset: John and Beryl never expected their house to be worth so much, and now they want to make the most of the extra money in retirement.
Tom and Rebecca, both 58, took out an interest-only mortgage on their Birmingham home. At the time Tom worked in car manufacturing, while Rebecca had a career in
retail.
- Age 55-60
- Approaching retirement
- Limited savings
- Little or no pension
Mindset: Taking out an interest-only mortgage seemed like a good idea at the time, but now Tom and Rebecca need to release some money for a secure retirement. Tom was made redundant and his new job as a handyman covers the bills and basics, but leaves little extra. Meanwhile, Rebecca also had to stop work due to a long-term medical condition. The couple don’t have children.
Married business owners Chris (65) and Alice (64) live in Bournemouth and have a son and a daughter. Their son, in his late 20s, lives at home and has been struggling
to save enough for a deposit on a flat in the area on his current salary. Their daughter lives nearby and is pregnant with her first child. She and her husband are financially
comfortable.
- 55-late 60
- Childrenl
- Approaching, or in, retirement
Mindset: Chris and Alice want to helptheir son get on the property ladder.
Married couple Andrea and James are in their mid-70s and have been enjoying a relatively comfortable standard of living until now, thanks to adequate private pensions. Their two children have successful careers and have no need for financial support, so Andrea and James have been doing all the things they couldn’t do when the children were young: carrying out home improvements, travelling abroad and upgrading their car.
- Mid-70s
- Children
- Private pensions
- Health concerns
Mindset: Andrea and James want to adapt their home to adapt their home to allow them to stay in their home for as long as possible.
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