Equity Release Option 5 Home Reversion

We suggest there are five core options when considering equity release of capital from property.

In order of priority, after downsizing (option 1) to a smaller property, family capital (option 2), retirement mortgage (option 3) and lifetime mortgage (option 4) have been discounted:

See Option 1 Downsize Option 2 Family Capital Option 3 RIOM Option 4 Lifetime

We suggest the final consideration should be a home reversion scheme for releasing equity from your home.  This is not a true equity mortgage as most people would understand them because you are selling a share of or selling the whole of your property with a lifetime right to live in the property.

No payments:  Even though you have sold the property and no longer own it, you continue to live in it ‘rent free’ but you still have a duty to maintain it.

Pros

• By selling your property, you release funds which makes sense if you have no loved ones to leave your estate to.
• By selling your property, you release funds for you to live on whilst you are active rather than perhaps struggling along financially only to then need social care in later life and you equity then being used to fund care.
• No interest payments each month meaning you keep all your capital, pensions, and other income.
• No interest payments each month meaning you do not need to prove affordability as there are no ongoing payments meaning most people can access this type of equity release scheme.
• Many home reversion equity release providers offer special terms such as free surveys, free legal expenses etc so it can be a cheap and quick option to access equity.

Cons

• As you have sold the property, you lose/do not benefit from the future equity growth/property price increases.
• There will be financial advice fees, equity release application fees, property survey fees and equity release legal fees.
• Your have sold your property so if you want to move/downsize in the future, you may have little or no funds left and may need to rent.
• By having no equity in the property, there is no equity left your family on your death or for later life care fees means tests if you need some form or social care which may mean a lower standard care home funded by the state.

There may be many other factors that influence a decision to use a home reversion scheme.  We consider this the ‘last resort’ and we urge you to contact us for professional advice before deciding to use home reversion.

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