Equity Release
Equity release is the general term used to cover "Home Reversion Plans", "Lifetime Mortgages" and some other types of loans secured on a heritable property. These types of plans are available to most homeowners over the age of 55. The amount of money which can be obtained is greater as the owner grows older. SHIP is a trade body which sets out standards to which its members must comply. These plans are very useful for homeowners who require capital or additional income, and are often used for IHT planning (Inheritance Tax).
Lifetime Mortgages
These are the most common type of Equity Release. This type of plan is arranged as a mortgage but with no repayments of capital or interest. The loan can be taken as a lump sum or as a regular payment. The interest is rolled up and is eventually repaid from the sale of the property after the owners' death. The remainder of the sale price forms part of the owner's estate and is distributed according to his/her will. The "Financial Services Authority" (FSA) now regulates all mortgage advice and requires a special qualification for advisers who advise on "Equity Release".
Home Reversion Plans
Home Reversion Plans are suitable for homeowners who are not concerned about any residual value being left to their estate. When this type of plan is set up the title passes from the homeowner to the "Reversion" owner. The owner receives a proportion of the value of the property and normally retains the right to live there for the remainder of their life. After the death of the original owner the property is sold and usually no value is left to the estate of the deceased. Some plans can be arranged so that a residual value is left to the estate.
