Whether we all like it or not, one day we will be heading towards retirement and be in the position of not knowing what to do with our homes. With important key terms such as mortgages and equity release being thrown at me as a 24 year old; it recently got me thinking and interested to read up on the subject more.
Equity release is the financial arrangement that lets you access the tied up money in your home. Currently only available to home owners aged 55 and over; it allows you to take the money you release as a lump sum or in separate and additional payments.
There are two which are worth knowing about at any age. As my parents will be selling and buying a new property within the next year, it's important to educate myself on this subject for my dad who's aged over 55.
Type 1- Lifetime Mortgage:
This involves taking out a mortgage that is secured to your property. This is only applicable if the property is your main residence and you have complete ownership of it. It's entirely up to you whether you choose to make repayments over time or instead, let the interest add up. The mortgage loan you borrow and any interest that has built up over time, is either paid back when you pass away or if you move into care for the rest of your life.
Home reversion involves selling all or part of your home to a home reversion company. In return, you'll be given a lump sum in whole or regular additional payments. Both options give you the right to live in your property until you pass away without having to make any payments such as rent etc; as long as you agree to keep the property in its best condition.
Both options are quite different, but definitely do give you the option to secure the value in your property. This is especially great if you're approaching retirement age and looking to start thinking about securing an inheritance for your family.