Equity Release Schemes Explained

Post War Baby Boomers can now give themselves an entire new lease of life via an equity release scheme. These lately retired home owners are often house rich however money poor resulting from lack of good pensions and the ever rising value of living.

Equity Release Defined

Equity release is the most common name used for schemes that launch money locked up in a retired dwelling owner’s property. The time period ‚Equity‘ means the amount of money worth that might be realized on the sale of a property. Money strapped retired house owners are often house rich but money poor throughout varied stages of retirement. Soaring living costs that out strip inadequate pension provision is the principle factor that affects the quality of life and even the essential essentials, for what needs to be retirement golden years for many post war baby boomers. When children grow up and go away dwelling, some retired house owners with giant properties are able to trade down to a smaller lower value property and launch the money (equity) in their bigger house. Nevertheless trading down might not be an option for a lot of, as their current property is probably not massive enough. Maybe they simply don’t want to move for many reasons comparable to emotional attachments, shut proximity of family and friends etc. So what are the options to trading down? With the exception to selling your own home and renting another property, there are two other ways to launch the money locked up in your house.

Completely different Types of Equity Release Schemes

Broadly speaking, these two totally different types of equity release schemes are sometimes known as a Lifetime Mortgage and ‚Home Reversion‘. Basically a life time mortgage because the name implies, is a mortgage for life. There are various variations on this theme with fixed rates for life, interest rolled up and draw down schemes, to name but a few. The main function of the lifetime mortgage is that ownership of the property is retained together with the benefits of elevated property values. When the house is sold, the lender is repaid and the balance is retained by the home owner or their estate. The other type of equity release scheme is known as Home Reversion. Essentially this is a way of selling your property at a reduced value for the lifetime right to live virtually hire free. The term ‚Reversion‘ could appertain to the fact that the property in the end reverts to the investor that provided funds to the house owner. The benefit of this scheme is that more cash can typically be released through a reversion plan than a Lifetime mortgage, notably for older home owners. Again there are numerous variations on the theme, comparable to a part reversion, whereby only a portion of the property is used to provide funds.