17:24 18 March 2013
Equity release, which is also known as home income plan, gives homeowners aged 55 or older an option to unlock or access some of the wealth they own in bricks and mortar.
This is possible through home reversion scheme or lifetime mortgage where homeowner doesn’t need to pay interest until after he dies or moves home.
Types of arrangements
Lifetime mortgage – This is a loan secured on the borrower’s home. The capital and the compounded interest is repaid by selling the home or the property when the borrower moves out or dies.
Interest only – A mortgage is made. The borrower pays interest while still living in the property. The capital will be repaid on death.
Home reversion – The borrower sells home normally to a reversion company. The borrower will either get a cash lump sum or will receive regular income while still having the option to live in the house for as long as he wish.
Home income plan – This is a lifetime mortgage where borrower uses the money to purchase an annuity that provides regular income.
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