Equity Release for Uncertain Times
As a homeowner aged 65 or over, your property in the UK is usually the largest asset you own. And, increasingly, it’s being seen as prudent to include this asset into any retirement planning you may undertake. That’s because there are ‘equity release’ products available which enable you to release some of the extra value that has built up in your home over the years as cash. And the money you receive from your property will be completely tax free.
Equity release provider, Retirement Plus, has launched just such a product – the Open Options Property Plan – which could offer you the passport to greater financial security if it fits with your particular circumstances and needs.
But what is equity release and how can it help?
Equity release products allow you to draw a lump sum or a regular income using some or all of the value you have built up in your home. You can live in your home for the rest of your life or move to a suitable property if you choose.
There are two main types of equity release scheme available on the market:
Lifetime Mortgages - This is a loan secured on your property, just like an ordinary mortgage. However, you do not normally make repayments in your lifetime. Instead the lifetime mortgage provider is normally repaid when you die or move into long-term care, and the house is sold. With most lifetime mortgages you cannot guarantee an inheritance as the amount of interest payable increases as long as you live. You can cancel by repaying the loan, but some schemes may have early repayment penalties.
Home Reversions - You sell part or all of the financial interest in your home. The amount you receive will be less than the current market value and will also be dependent on your age and gender. Although you will no longer own your home, you will have the right to live there for the rest of your life or until you move into long-term care. You know what proportion of your property has been sold and what proportion you have left to raise further money on, or to leave as an inheritance. When you die the house is sold and the home reversion provider receives the sales proceeds for the share you have sold. You can cancel but it is likely that you will have to pay the full market value for the share you wish to repurchase.
How is the Open Options Property Plan from Retirement Plus different?
The Open Options Property Plan is a type of home reversion plan but it has some important differences from the standard home reversion plans.
- You do not surrender ownership of your property – instead Retirement Plus owns the property jointly with you
- Like other home reversion plans you sell a share of the ownership of your property but, unlike other home reversion plans, you do not receive less money than the value of the share you give up at the start of the plan. The Retirement Plus share increases to an agreed maximum over a long period of time rather than at the start. This can benefit your estate should you die earlier than expected
- When you die, Retirement Plus receives the sale proceeds for the share they have a right to at that time. You can cancel at any time by paying the market value of the Retirement Plus share, current at the time you repay
For your security and peace of mind, the Open Options Property Plan is only available to those who have taken advice from an equity release specialist adviser and a solicitor. It is also preferable to speak to your family about your plans.
Equity release guides are available from www.Moneymadeclear.fsa.gov.uk. And, please remember that entering into any equity release plan may reduce the value of your estate, will not be suitable for everyone and could affect your entitlement to state benefits. This is a home reversion equity release plan. To understand the features and risks, ask your financial adviser for a personalised illustration.
Retirement Plus is a Milton Homes company which specialises in providing equity release products to homeowners aged 65 and over. Retirement Plus is authorised and regulated by the FSA and is a member of SHIP (Safe Home Income Plans) the trade body for equity release providers.