Compare Home Equity Release Schemes
1. Lifetime mortgages
- A loan in form of a mortgage is secured on your house
- The loan capital is paid out to the homeowner in a tax-efficient way
- Advantage: the homeowner retains complete control over the property
- Disadvantage: interest is payable or rolled up on the loan, in which case the accumulated interest will be repaid with the loan when the house is sold or on death
2. Home reversion schemes
- The whole or part of the property is sold to a home reversion company
- The homeowner can live in the property rent-free
- The capital paid out can be used as a tax-efficient income
- Advantage: no interest is payable or rolled up, no need to be concerned over future house prices
- Disadvantage: the plan holder has to give up part or all of his ownership rights to the property
Both types of equity release schemes might be suitable for different homeowners; however, either of them will provide homeowners who are prepared to make use of the equity locked in their property with a much needed retirement income.
In order to provide homeowners with a guarantee for the safety and security of their schemes, most reputable providers of equity release plans have signed up to the Safe Home Income Plan's (SHIP) code of practice, and a 'no negative equity' clause is obligatory in their plans.