What types of equity release product are there?

People with age over 55 generally struggle with their finances. Most of them own home, and this is where all the solutions of their lies. When you own a home, you need not worry about the finances as you can release the equity tied up in your house and use the cash for your expenses. You won’t have to be dependent on anybody for your money needs. With equity release, you can access the money tied up in your house. You can do this via several methods, which may include lump-sum withdrawal or in installments.

Here are the different types of equity release products available to you.

1. Lifetime Mortgage

When you choose for this option, you are taking a step forward to take out the mortgage you’ve secured on your property. You can do this while still retaining the ownership. You can also keep some amount aside as an inheritance for your children. 

It is your choice if you are letting the interest roll-up or are making repayments. The interest or loan amount is repaid when you die or are under long-term care. A majority of the people who choose to release equity go for an independent lifetime mortgage option. With this, you don’t have to worry about making any repayments. 

The minimum age to opt for a lifetime mortgage is 55. There is also a cap on the minimum percentage of the amount you can withdraw. Generally, you can withdraw up to 60% of the total amount of your property. The amount and rate of equity that can be released also depends on your property’s value and your age. Lifetime mortgage adviser will always guide you for this.

A usual trend is that this percentage increases with your age. You also have the right to live in your home till you die or have to move to long-term care. 

2. Home reversion

In this type, you sell a part of your home or the entire property to a home reversion provider. He will, in turn, provide you a lump sum amount or regular payments. In this case, you can live in the house as long as you are alive. But this has one condition. You will have to agree to maintain and insure the property. You can also earmark a part of your property as an inheritance for your family. The retained percentage will remain the same until and unless the value of the property changes. 

An advantage of home reversion is that you have the freedom of selling a part of your property. Generally, you will receive 20-60% of the market value of your property. Before you decide to choose this option, you should make sure that whether or not you want a lump sum or regular payments. There is a minimum age for you to be eligible to apply for home reversion. Generally, it is between 60-65, and it depends on your home reversion provider.

Equity release seems to be the right choice for those who are looking for some extra money while still living their homes. But it has its cons.