Many home owners, including pensioners, may find that UK equity release schemes such as lifetime mortgages and home reversion plans, are a good solution for financial difficulties. For example one pensioner in Cambridgeshire was able to raise funds to upgrade an awkwardly designed kitchen in her bungalow. Equity release is a major financial decision, and specialist advice should always be sought before taking out the scheme. Scheme providers will always offer a personalized illustration with no obligation.
Many UK home owners will own their home outright (i. E. The mortgage is fully paid off), but they may still face some financial difficulties, such as needing a boost to retirement income, or needing a lump sum to pay other debts (e. G. Personal loans, credit cards). They may also require a lump sum to pay for home improvements, to buy a once-in-a-lifetime holiday, or to help younger family members to get on the property ladder.
One typical example was a 68 year old Cambridgeshire pensioner, who had downsized from her original home to a bungalow. She was unhappy with the kitchen in the bungalow, finding it badly designed and awkward when she used it, but she could not afford the loan repayments on a personal loan for the amount needed for a new kitchen.
She contacted a number of equity release companies, and soon found the deal which was right for her. The money which she was able to release more than covered the cost of a new kitchen.
Equity release is a process for releasing the value tied up in a person’s home. The home must normally be owned outright (mortgage paid off). There will usually be a minimum value of home, but this can be set as low as 70,000 pounds so the majority of UK homes will qualify.
Those companies which work in the field of equity release recognize their responsibilities to their customers, and will always explain why equity release may not be the best solution for everyone. Entitlement to state benefits may be affected, and the value of the estate passed on via a person’s will may be reduced substantially.
It is therefore recommended that people considering equity release should always seek expert advice. This will help them to understand all the features and risks.
A UK equity release plan will often be either a home reversion plan or a lifetime mortgage. With a lifetime mortgage scheme, a loan is secured on the borrower’s home, but the borrower retains full legal ownership of the property. The loan principal, plus any accrued compound interest, is paid off on the owner’s death, or if they leave the home (for example to enter a nursing home). As the borrower still owns the home they retain all relevant rights and obligations of home ownership. A home reversion plan differs from this in that all or part of the home is sold to a third party. In return the owner gets either a lump sum or a regular lifetime income. The owner is entitled to remain in the house for as long as they wish.