Types of equity release schemes
Equity release will reduce the value of your estate and can affect your eligibility for means tested benefits.
There is a range of equity release schemes available on the market offered by reputable equity release providers, and they fall into two main categories:
- Lifetime Mortgages
- Home Reversion Plans
Each type of equity release scheme facilitates a different method of releasing the equity in your home, and there are various other useful features available to create the ideal equity release scheme for you, including:
Many equity release schemes come with a no-negative equity guarantee, and in some cases there are plans which also enable you to protect a fixed share of the value of your home. For example, if you protected a 30% share in your home, you have a guarantee that a minimum of 30% of your property value is protected for you in later life or as inheritance for your beneficiaries.
Some providers will allow you to release more capital from the equity release scheme if you suffer from one of a list of health conditions.
Many equity release schemes allow you to release the equity in the form of an income, by releasing the capital in staged payments over your lifetime.
There are some equity release schemes available with a pre-agreed ‘cash reserve’. Like an overdraft, this is a facility which allows you to draw-down cash whenever you wish, so it’s ideal for generating funds when required for home improvements, maybe a new car, a special holiday, etc. Interest is only added to the amount drawn, so they can work out much cheaper than other types of equity release schemes, depending on your needs.
Flexible Drawdown is a complicated area with both advantages and disadvantages. Please review the dedicated section on this subject within the Equity Release area.