Types of Equity Release

Lifetime mortgages

A Lifetime mortgage involves taking a type of mortgage which does not require monthly repayments, although with some plans rather than roll up the interest you can opt to make monthly repayments if you wish.

You retain ownership of your home and interest on the loan is rolled up (compounded). The loan and the rolled up interest is repaid by your estate when either you die or you move into long term care. If you are part of a couple, the repayment is not made until the last remaining person living in the home either dies or moves into care, meaning that both you and your partner are free to live in your home for the rest of your lives

If you take out a Lifetime Mortgage, you can choose to receive your funds in a lump sum or in smaller, regular amounts. There is also an option available to increase the amount you have borrowed, as and when you want to, up to a maximum limit agreed with the plan provider.

You can also elect to protect some of the value of your property as an inheritance for your family, meaning that you can benefit from releasing equity, whilst still retaining something to pass on to your children. Some people may be able to release larger lump sums due to impaired health or may prefer to make monthly repayment in part, or in full, with an option to roll up at a later date, if the monthly repayments became unaffordable.

Home Reversion Plan

A Home Reversion Plan also allows you to access all or part of the value of your property while retaining the right to remain in your property, rent free, for the rest of your life.

With a Home Reversion product the provider will purchase all or part of your house taking into account your age and your health and will provide you with a tax free cash lump sum (or regular payments) and a lifetime lease, guaranteeing you the right to stay in your property rent-free for the rest of your life. There is no day-to-day interference and no restrictions on treating the house exactly as before; as a private home to live in freely.

The percentage you retain in your property will always remain the same regardless of the change in property values, unless you decide to take further cash releases. At the end of the plan your property is sold and the sale proceeds are shared according to the remaining proportions of ownership.

Due to the higher risk involved in this type of plan, Prospect does not offer advice in purchasing Home Reversion Plan products. However, we are able to refer you to an alternative specialist if you wish to take advantage of one of these plans.

Due to the advantages and disadvantages of both types of plans it is important for you to get expert advice from an experienced adviser and, if possible, to talk it over with your family to ensure you choose the best plan to fit your needs.

To understand the features and risks of an equity release plan we will provide you with a personalised illustration which outlines all of the key features and aspects of the recommended plan.

Our firm and our experienced equity release advisers are members of the Equity Release Council

Home reversion plans and lifetime mortgages are complex products. To understand the features and risks, ask for a personalised illustration. Your home may be repossessed if you do not keep up repayments on your mortgage. A lifetime mortgage is a loan secured against your home. Equity release will reduce the value of your estate and may affect your entitlement to means tested benefits. The levels, bases and reliefs from taxation are subject to individual circumstances.