Using the Equity in your Home

How to use the qquity in your home

There are various products on the market to enable you to tap into the value of your home without having to sell it and move out, but each scheme needs careful consideration. A great number of elderly homeowners find themselves in the unenviable position of having to watch every penny they spend while their money remains locked up in the single biggest asset - their home.

Many people have found Home Income Plans/Equity Release Schemes to be a safe and successful method of releasing regular income to improve the quality of their life Beware! Some Schemes have been shown to be neither safe nor successful.

Some Schemes offer a loan with the house as security.

• Roll up Loan schemes involve a loan on the property with no repayments. Interest accrues to be paid from the proceeds of the sale of the property when you die. However, the interest grows very quickly.

• In other schemes, a loan is taken out at a fixed rate and used to purchase an annuity to provide a guaranteed income for life. The income is used to pay the fixed interest on the loan and the rest is paid to you monthly for life.

Some Schemes involve selling all or part of the property in return for a life tenancy. These are called Home Reversion Schemes. Under a Home Reversion Scheme, when only part of the property is sold to set up the scheme, your estate will benefit from any increase in the value of the part you retain.

Some Plans give you freedom to move house, if your circumstances change.

There is a Company, Safe Home Income Plans (SHIP) which offers advice on "safe plans". It is approved by Age Concern and has a Code of Practice. Ring us now for further details. SHIP insist that before any of their approved plans are finalised your solicitor must complete a certificate confirming that you have been advised on all the points of the scheme i.e. the "small print". The minimum age for most plans is 69 for single people, but a combined age of a couple must be at least 145 with both parties being over 70. Below these ages the benefits may not be worthwhile. Older ages benefit most.

Consider the costs involved, the effect of your Plan on moving house, changing house values and the effect of any Plan on the value of your estate. Consider whether you may need Long Term Residential Care  in the future. How will this be financed if your have already tapped into the value of your house? You should discuss any proposed scheme with your family.

You should consider your state of health. In the event of your early death you may have received little benefit from the scheme, but your estate could be reduced by a significant amount. Some Plans include a certain amount of protection to your estate should you die early.

Investment Bond Schemes and Roll up Loans are very risky and not recommended by SHIP.

Consider whether the person you are dealing with is independent or acting for one company and therefore only offering that company‰s product. You should use a Solicitor of your choice rather than one recommended by the Plan Provider. Kaslers are completely independent from any Plan Provider.

After completion of the plan, consider whether you need to review your Will.

 

Related topics you may find useful:

Leases
Making a will
Property - Residential

Call Michael Breeze on 07900 195 195 or call 0845 270 2511 to set up an appointment