Reverse or Equity Release Mortgages
An Equity Release Mortgage, also know as a Reverse Mortgage, allows you to realise the equity you have built up in the value of your home to provide a source of income in your later years.
You shouldn't need to make any repayments whilst you are still living in your home - when your house is sold - if you move, go into care, or pass on - the loan and all the interest owing is paid from the proceeds of the sale.
If you've worked hard all your life to buy your home, using some of its value to ease your retirement is surely better than struggling in poverty to leave it to someone else. Rest assured that your loved ones want to see you enjoying life rather than struggling to leave an inheritance.
Only a proportion of the value of your home (15% to 40%) is available for release - compare different lenders to find out what is available for your specific circumstances. You are able to take the payment as a cash lump sum, take a regular income or a combination of the two. If yow take a lump sum - make sure it's earning a good, secure rate of interest - unless you plan to use it immediately for home improvements or the cruise you've always promised yourselves.
What are the pitfalls? You may not find it so easy to move house: if you are contemplating downsizing, in the near future, this could be a much better way of accessing the value of your assets. If interest builds up on your loan fasted than the value of your property increases, then over time, your could reach the point of negative equity - where the value of the house no longer covers the amount of the loan. Many Reverse Mortgages have limits that prevent this - provided various conditions are met.
Seek independent advice before committing to any agreements - by all means use the internet to find out what is available and to make initial applications, but you need to check the paperwork before signing any final agreements.