If you are over 55 and looking to release money from your home, there is more than one way to take it. Here are the four main release options and when each one makes sense.
If you are over 55 and need to release finance from your property, later life lending (also known as a lifetime mortgage) can be a flexible option. It allows you to access some of the equity tied up in your home without having to move.
When it comes to taking your funds, there are several options available, and an adviser will be able to recommend which is most suitable for your circumstances. The way you draw your money affects how interest builds up over time, so it is worth understanding the differences.
This option lets you release a single lump sum from your property, with no payments needing to be made until the loan is repaid in full. Interest is added to the loan, and the total, along with the original amount borrowed, is repaid when the property is sold, usually when you pass away or move into long-term care.
A particularly flexible option. You borrow an initial lump sum and then agree a reserve facility you can draw from in future, as and when you need it. Rather than the interest rate being fixed on the whole amount at the outset, the rate is set at the point of each drawdown, and interest is only charged on the money you have actually taken. This means your overall interest can be lower than taking everything upfront.
This option lets you make monthly payments covering all or part of the interest throughout the life of the loan, reducing the effect of compounding interest by the end. It can help preserve more of the equity in your home for your estate.
Much as it sounds, this provides a set amount paid to you each month to top up your income. You only pay interest on the amount borrowed, and you are sometimes required to take a small initial lump sum to set it up.
Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks, ask for a personalised illustration. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. We will always explain the implications fully before you proceed.
Later life lending is not one-size-fits-all. Speak to an adviser who will explain the options, the costs and the implications, and recommend the most suitable route for your circumstances.