Best Equity Release Schemes

If you are shopping around for the best equity release schemes then you need to consider the two main types of equity release schemes that are commonly available on the market; namely the lifetime mortgage and the home reversion plan. There also other types of equity release schemes available but learning more about these two major equity release schemes will help you hone in further on the best equity release schemes.

Lifetime mortgage

The lifetime mortgage is for seniors, regardless of their health. The mortgage can be used for any personal reasons including financial support, debt settlement, paying for costs related to health, donation, supplementary pension, reimbursement of any other loans outstanding, home improvement and so on.

A lifetime mortgage is both a:

 - loan where the borrower will not pay monthly. The loan will be repaid at once, ultimately, at the death of the borrower of when the borrower is taken into permanent care. 
 - Loan that allows a bank to finance for any purpose.

A lifetime mortgage can be paid at once as a lump sum, or according to a schedule of periodic payments.

When you take out a lifetime mortgage you fully remain the owner of the mortgage. The home owner also continues to occupy the property for as long as required, until death or long term care.

The amount of lifetime mortgage you are granted by the bank is capped based on the value of the property, your age, and the possible capital loan that you still owe on the property. Upon the death, the amount of lifetime mortgage (initial capital + accumulated interest) will be covered by the sale of the property subject of the mortgage.

The settlement of the lifetime mortgage is done such that your heirs do not have to pay the loan, only the sale of the property to covers the cost of the settlement.

If the property value does not meet the repayment of the lifetime mortgage plus interest, the bank bears the loss. Conversely, if the sale leads to a surplus, the additional amount left over will be granted to the heirs.

So upon death (or long term care, the heirs may sell the property, repay the lifetime mortgage and potentially benefit from the residual value of the property. 

Home Reversion Plan

In the Home Reversion Plan, the homeowner usually a senior, transfers their property to a buyer in return for a payment for his/ her benefit. Selling this way adds funding to a pension for the rest of the life. The income from the sale is usually larger than if the property was rented. In addition, the seller is guaranteed to continue to occupy the property for as long as he/ she wants (until death or long term care). 

If you want to make sure that you get the best equity release schemes then learning more about the above two commonly available options is wise. In addition, you should have a chat with a qualified equity release schemes adviser to find more about other plans available to be able to make an informed decision to select from the best equity release schemes on the market .