Due to the constant rise in living costs, the retirement funds of some pensioners are no longer sufficient for them to meet their daily living costs and still be able to enjoy their retirement. In such cases, many pensioners are looking for another way to gain extra income that will make it possible for them to adequately meet all of their daily living costs and have sufficient funds to enjoy their retirement. Equity release schemes are one way to make this happen.
This is now possible with equity release schemes like lifetime mortgage or home reversion. The fact is that most pensioners own their own property and have capital locked up in their property. Equity release plans make it possible for pensioners to release locked up capital from their property. So even though most pensioners are rich in that they have thousands of dollars locked up in their property, they have a cash-flow deficiency which no longer makes their golden days golden.
Many pensioners own a large property which they no longer need once they have become of age. However, they need a stable cash-flow. Some pensioners sell their property and move into a smaller property. Some pensioners cannot dare to leave their property due to sentimental value. In such cases, equity release schemes allow pensioners to sell their property or a part of it with the option of being able to remain in their property for the remaining part of their lives. For those who do not want to immediately sell their property, they are able to take a loan that is secured by their property without having to repay the loan while they are still alive.
A lifetime mortgage and a home reversion plan are the two most common equity release schemes. The lifetime mortgage is exactly as its name implies. It is a mortgage that pensioners take against their property that lasts for the rest of their lives. The advantage of a lifetime mortgage is that with the exception of the interest only lifetime mortgage, there are no monthly payments.
The home reversion plan is quite opposite. It does not involve taking a loan. Instead, pensioners are allowed to sell their entire property or only a part of it. The advantage of the home reversion plan is that although the property is sold, pensioners can remain in their property until the time of their death. This is done through a lifetime tenancy agreement that states clearly no rent is needed and the property will revert to the provider at time of death. Anyone named in the agreement can stay until death.
The two plans stated above have different qualifications. For the lifetime mortgage you need to be 55, but for home reversion you need to be ten years older than the age for lifetime mortgages. Home value is also calculated slightly different for each product to ensure there is a profit for the provider of these equity release schemes.
You also have more than one option when it comes to lifetime mortgages. While you have three plans that require no monthly payment, you also have one plan that is an interest only option. Under this plan you make a monthly payment.
In the drawdown mortgage you make no payments and interest only accrues on the actual funds you released from the account. You might take ten thousand in a lump sum initially as per the requirements. After this initial instalment you can take as little as you need or as much as you desire. You are of course limited to the amount of equity in the home and the amount released for your use. The best part is interest only compounds on the amount you remove from the account and not all that is available.
Another option from the standard lifetime mortgage is the enhanced equity release. This is for people with illnesses or reduced life expectancies. There are some individuals with genetic disorders like heart disease, others who smoke, or still others with cancer. The point is that disease can lead to a shorter lifespan in your retirement. In order to enjoy it to the fullest you can take out an enhanced lifetime mortgage, which gives you a larger lump sum than other products. You have this money to spend and a comfortable life, at least as much as possible.
Compare equity release schemes to find out which one is going to be the best for you because you deserve to have a good retirement after working so hard all your life.