Equity Release - Many Pensioners’ Solution for a Comfortable Retirement

Pensioners have seen their income from savings and pensions fall dramatically this year, as they continue to feel the impact of the drop in interest rates. This has left many pensioners wondering whether equity release is the answer to their financial troubles.

Despite the drop in property prices many pensioners still have a considerable amount of equity on the homes, of which they could drawdown upon via an equity release plan. Releasing equity from their home may be the answer for many pensioners looking for a more comfortable retirement and for those wishing to supplement their current income.

Determining Whether an Equity Release Plan is Right For You

Firstly it’s important to say that equity release is not for everyone – speaking to a financial advisor will help determine whether signing up for an equity release plan is right for your individual needs.

However, for the majority of pensioner’s equity release is a great way to unlock the equity from their property and release some much needed funds to do whatever they want with it.

For those pensioners who do not want to sell their home, and move somewhere cheaper – or for those simply wanting to wait until the property market picks up to get a better price for their property – equity release can be the answer to their financial worries.

Equity Release Plan Choices

There are 2 main choices, the first is a home reversion plan; the second is a lifetime mortgage. You should discuss both with a financial advisor to see which plan is right for you.

The two equity release plan options are:

Home Reversion Plan

In this option you sell a share – or all of your property – in exchange for a lump sum of cash but in exchange you are allowed the right to remain living in the property rent free until you die or permanently vacate the property, for example moving into long term care.– and you won’t have any repayments to make.

Lifetime Mortgage Plan

Majority of pensioners choose this option.  Like a conventional mortgage, it allows you to release a lump sum of cash, with the amount of cash released – along with the interest accrued – payable upon your death or when you move into care. The monies payable are then repaid out of your estate.

Equity release providers who are members of SHIP, guarantee a ‘no negative equity’ which means you or your heirs will never owe more than the value of your home and no debt will ever be left to the estate.

Many lifetime mortgage plans now also come with a drawdown facility – creating a 3rd option, a Drawdown Lifetime Mortgage.

Drawdown Lifetime Mortgage

This is essentially a lifetime mortgage but with added flexibility, as it allows you to arrange a lifetime mortgage for a larger amount than you initially need. The cash can then be released over time as and when you need it.

This is a great option for some pensioners who can take the cash as and when the need it, but only pay interest on the cash they have actually taken. An added benefit of this option is even if the house value lowers, you can still borrow the amount you were originally offered.

For no-obligation advice on whether equity release could help you and information on the best plans please call our 24 hour helpline and speak to one of our advisors:

Or use the comments box below to ask a question.

Equity Release may involve a Lifetime Mortgage or Home Reversion Plan. To understand the features and risks ask for a personalised illustration.

Age Partnership provides initial advice at no cost and without obligation. Only if you choose to proceed and your equity release case completes would a typical fee of 1.5% of the amount released or £795 be payable.

Important things to consider about equity release:

• Equity release could affect your current or future entitlement to means-tested benefits
• Releasing equity to spend in your lifetime can reduce the amount that is left in your estate when you pass away

Related posts:

1. Equity release could fill the void left in pensioners’ income since base rate cuts
2. Beginners guide to Equity Release Loans
3. How Equity Release Schemes Can Improve Your Retirement
4. Equity Release - unlocking money from your home