Once the amount of debt has been deducted, the remaining value of a homeowner’s property is known as equity. There is the opportunity for 60 year old property owners who have repaid their home mortgage to release some of this equity value early by taking out an equity release plan. An equity release plan entails borrowing for the remainder of a person’s life on their repaid mortgage until the selling of the property following the person’s death to repay the loan. The loan can be used for any number of reasons in the person’s retirement.
Another option for equity release is taking out a drawdown plan, which enables a lump equity sum or an income to be taken in accordance with the needs of the property owner. There is interest accumulated on a drawdown plan up until the residence is sold. Ultimately, repaying this debt and the accrued interest can take up all of the equity, so it is not a light step to take and requires a great deal of thought and impartial guidance from a reputable financial advisor.
There is also the option of taking out a home reversion plan, which entails gaining a cash sum and a lease for the borrower’s lifetime to live within the property by selling a percentage, usually one or two thirds, of the total value of the property. A home reversion plan delivers the clear benefit of the property owner retaining an agreed percentage of their property to bequeath to their family and loved ones.
It is imperative for borrowers to closely check the details of these plans, as it is crucial that people entering into their twilight years make decisions which will provide them with the safe and secure retirement they deserve. Above all it is vital to get dedicated and impartial professional advice, as the choices property owners make in relation to equity release mortgages will impact on their retirement years and the inheritances of their beneficiaries.
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