Inflation is most likely the biggest enemy of the pensioner. When you retire with a fully paid-up home and a sizeable amount of money in the bank, you always think that you have enough to sustain you for the rest of your life. Very often inflation eats away at your nest egg and soon you may find that you can no longer meet your monthly commitments. The good news is that there’s no reason to live in poverty for the rest of your days; with something called equity release you can now have a comfortable old age without financial worries.
In the UK there are two different types of equity release. The one is called a lifetime mortgage and the other a reversion plan. Let us briefly look at the pros and cons of these two options:
A lifetime mortgage plan is great if you have a fully paid up house or apartment. The way it works is that you register a bond on the property and thus get a lump sum paid out to you. You then re-invest this money and receive a regular monthly interest payment.
Of course there is a cost to this. By the time you die, the outstanding bond will probably be roughly equal to the value of the property, so there won’t be much for your family to inherit. If you have children, they should be aware of this situation.
Fortunately the mortgage will never become more than the value of the property, so your family will never have to pay in any money. A NNEG (No Negative Equity Guarantee) makes sure that won’t happen.
The 2nd kind of equity release is called a reversion plan. If you choose this option, you will sell a part or all of your property to a third party. In return he will give you the right to remain living in your house or apartment until you die. A monthly income will also be provided, the amount of which depends on the value of your property.
Before signing up with a lender, first ensure that he is a member of SHIP, which is a voluntary group laying down standards for the industry. There are some dishonest brokers in the market and you don’t want to fall victim to one of them. Fortunately, since the industry has come under the control of the Financial Services Authority, there are not many of them left in the market.
For independent guidance regarding Equity release schemes , simply click 1 of the links Equity Release Advice | Lifetime mortgages



