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What is Equity Release and Is It Good For Seniors?

by on July 7, 2021 in Uncategorized

Financial stability is a crucial aspect of enjoying your retirement years. As you approach your senior years, the need for a life of comfort becomes more pressing. After all, you have worked all your life and could now use a break. There are many ways of ensuring that you fill your sunset years with joy, relaxation, and financial freedom. 

Equity release is one of the means through which you can get creative about affording the better things in life in your sunset years. In this post John Lawson, an Equity Release Expert from Sovereign Boss will tell more about how much you can gain from equity release. It’s an easy to use tool that uses the value of your home and your age to provide you an estimation of the amount of money you can collect through an equity release every month.  But first things first, what’s equity release? 

Defining Equity Release 

In simple terms, equity release is the practice of obtaining income against an object of capital value, such as a house, while also retaining the use of the object. In the case of a homeowner, you’ll be able to live in your home while still borrowing money against the house. It’s the perfect win-win situation for seniors who are looking to cut back the hours at work without changing their lifestyles. 

At this point, you must be wondering—if you get to make money thanks to your house and still live in your home, what’s the catch? Well, the answer is that you’ll need to repay this money at a later date. Often, what happens is that the house becomes the property of the income-provider once you have vacated it either due to death or because you’ve decided to move into a care home. 

Most Popular Types of Equity Release 

There are different types of equity release arrangements. An individual’s needs inform the kind of equity release plan that they choose, as some terms are more flexible than others. 

Lifetime Mortgage 

The lifetime mortgage is the most popular equity release arrangement, and for good reasons. For starters, it’s very straightforward—you take a loan against the value of your home and receive a tax-free lump sum or an initial release followed by smaller payments (drawdown). 

If you choose the lump sum method, the lender calculates compound interest on the principal amount. The good news is that you’ll not be required to make any repayments to the lender during the duration of your equity release plan. Instead, the lender receives payment once you’re no longer an occupant of your home, i.e., once you have transitioned into a long term care facility or passed on. 

Depending on the terms of the lender you work with, you may be able to negotiate inheritance for your loved ones. That is, you may require that a portion of your home’s future value goes to your heirs after your death. 

Home Reversion 

A home reversion involves selling your home to a third party, also known as a reversion company or even an individual buyer. You may choose to sell part or all of your home. However, you’ll still have the right to keep living in your property, rent-free, for as long as you like. 

Later on, when the equity release plan comes to an end, the reversion company will sell your home for a specific appreciated amount and then split the proceeds with you. 

Interest-Only

This type of equity release provision involves borrowing a loan against the value of your house and then making regular interest-only repayments until the end of the plan. The capital amount borrowed is repaid after the death of the homeowner. 

Is Equity Release Good for You? 

Equity release is an excellent bet for homeowners who are aged 55 and above who want a steady income without having to break their backs at work. With equity release, you have access to money that you can spend on anything that you wish, including vacations, buying gifts for your loved ones, home improvement, etc., without losing your home.  

Your fifties and beyond are not a time to worry about your next paycheck. By choosing equity release, you can free your mind and time to worry about more important things—like spending time with the grandkids or catching up with your lifelong buddies over a game of bingo.

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