Another very complicated area of financial planning that requires additional qualifications to practise.
The term “equity release” is essentially helping people, usually those over age 55 to obtain in cash, a portion of the equity tied up in their property. The term “equity” can be described as the value of your property less any liabilities secured upon it. The amount released can then be used as a lump sum or turned into a source of income depending on your needs.
At Financial Fortress we have the additional qualifications, experience and knowledge to explain all your options and make recommendations based on your needs. We welcome family members to get involved in this important decision and will take as much time as you need to explain your options without pressure or jargon. We will search the whole market to obtain the best deal.
There are essentially 2 main products currently available and they are explained below:
You take out a mortgage which is secured on your property. Most providers allow you the choice whether to mortgage the whole property or keep some back for either future use or to leave a legacy to your family.
You can then choose to either pay back interest payments (in which case the debt remains constant) or “roll up” interest (in which case the debt gets larger in the future). The loan amount plus any interest (if rolled up) is then paid back when you ultimately leave your property, usually for long term care or on death.
You can usually raise up to 60% of your properties value using this method depending on your circumstances. Generally speaking the older you are the more you may receive.
Home Reversion Plan
You actually SELL part, or all of your home to a reversion provider in return for a lump sum or regular income. The reversion provider then leases back your property giving you the right to permanently reside there until you leave (usually due to long term care or death). Under normal circumstances you pay a “peppercorn rent”, perhaps £12 per year.
You can choose to sell part or all of your property, the more you sell the more you will raise immediately but the less is left for your estate. The % of your property you retain will always stay the same and therefore you may continue to benefit from some of your properties appreciation in value.
With reversion plans it is extremely important to realise that whilst you may have sold your property, you are still financially responsible for its upkeep and completing repairs.
You can normally raise between 20% and 60% of your properties value but again this depends on the provider and your circumstances
Ultimately when you leave your home due to long term care or death, the reversion provider takes absolute control and sells your property. Where you retained some interest (ie: did not sell all your home), the proceeds will be paid back to your beneficiaries.
There are many providers available and we strongly recommend you only consider plans stamped as being provided by an “Equity Release Council Standard” provider. This provides further protections to you in the form of:
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