There are two main types of equity release schemes, home reversion and lifetime mortgage, here at retirementsolutions.co.uk we are asked many times, which is best?
Each of the two types has advantages and disadvantages and these need to be investigated to see which one might be most appropriate for your own personal circumstances and objectives. You should also seek independent legal advice before committing to either scheme.
Lifetime Mortgage as it says is a mortgage secured against your home, you can choose a scheme that allows you to pay interest each month or a roll up interest scheme. With the roll up interest scheme the debt will increase each year and because most lenders charge compound interest you will pay interest on the interest you are charged.
Home reversion on the other hand involves you selling all or part of the property to raise equity. These schemes have the advantage of no interest to pay and also knowing what per cent of the property is still owned by you. Of course there is discounting which means you only get a percentage of the portion you sell as the price is discounted because the reversion provider will have to wait until you leave the property on death before they will get their money back.
So which is best, lifetime mortgage or home reversion?
Well as you would expect us to say, lifetime mortgage or home reversion, it depends on you and your objectives and your attitude to risk.
Seek independent legal and financial advice and discuss the advantages and disadvantages of each then make a decision.
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