How to Compare Equity Release Schemes

As you enter into your twilight years it can often be extremely frustrating that you have worked hard and saved for years to own the roof over your head and yet in your lifetime you may not be able to benefit from the value of this key asset. With equity release it is possible to have your cake and eat it – you can maintain a roof over your head, one which you own, and also access some of the value within this roof. Start to compare equity release schemes to fully understand this concept.

Equity release schemes are a great way to access this equity and there are hundreds of providers across the UK giving you a wide range of options. In order to choose the best equity release scheme for your circumstances it is best to compare what is available on the market.

One of the first things to do is shop around for different providers and compare equity release schemes. You can either do this yourself or use one of the comparison websites available. If you are less internet-savvy then it is always a good idea to approach reputable financial institutions and enquire about what they have on offer.

Another way of comparing equity release schemes is to contact the Safe Home Income Plans (SHIP). All of their providers must adhere to a strict set of rules, the SHIP Code of Conduct, which offers a great deal of protection to the customer. Remember that this is your home and therefore any contracts entered into must be done so with the utmost caution.

Choices offered to Homeowners
Under the equity release scheme concept you have two major options as a home owner if you want to access equity in your home. They are home reversion and lifetime mortgage. The first thing that should be mentioned is that the money released in equity in this way is not considered taxable. You gain it tax free because it is not income and it is not capital gains. If you were to sell your home for a smaller home or move to a care facility or nursing home then that money from the sale would be considered capital gains.

In order to qualify for the equity release schemes available to you, it is necessary to be 55 years of age. For home reversion you need to be 65 years old. There is typically a cut off of 75 for any equity release scheme. In the past home reversion providers considered buying property from those who were up to 80 years of age. Compare equity release schemes in order to see if changes have been made to the age limitations, as things change to fit the current market.

Home Reversion
Under the home reversion concept you sell part of or your entire home. You sell it in order to get money, but you sell it to a provider willing to offer a lifetime tenancy agreement that stipulates rent free living. You still maintain the house and pay all utilities; however, you do not pay rent and you do not incur debt that is paid upon your death or when you move to a new location.

The provider determines the percentage they pay out for the value of your home. It will not be the full value of your home even if you sell the entire home. Home reversion providers make money by giving you less money in a lump sum than the value. The difference in value and your lump sum is profit.

Lifetime Mortgages
A lifetime mortgage is a mortgage. It is a loan with compounding interest that means debt. Debt is paid off by remaining family or the sale of the home. Interest will always accrue on the loan until it is paid off.

Downsizing Gives you Money Too
Also consider other options that are available as a means of releasing equity. Perhaps you could downsize on your property and release equity in this way therefore still owning your own home outright but without committing to a long term scheme such as equity release.

Often, downsizing has other related benefits such as a reduction in household expenditure. You can always choose to go with an equity release later on even if you have downsized your home. You are not limited in your options unless the value of your home is below £70,000. Always make sure to compare equity release schemes before making a decision. Whatever decision you make it is important to seek independent financial advice before committing.