Later Living and You

October 7, 2013
This post was brought to you by McCarthy & Stone
With so many financial options open to anyone in retirement, it’s now possible to enjoy to the full the freedom that a life without work brings.
No longer is retirement seen as a time to slow down, full of financial restrictions due to low income. Thanks to the property booms over the years, the value of your property may have risen, giving you a very valuable asset.
And the aspirations and dreams of many retirees are becoming a reality, thanks to rising property values.
This is partly down to equity release schemes, which enable people over the age of 55, to take value out their homes to enable them to enjoy their lives in retirement.
While the idea of an equity release scheme may trouble anyone who has saved long and hard to own their home, the release of money can help fulfil the dreams of a lifetime.
There are several equity release options to choose from, but before you take the first step it makes sense to do some research and then talk through the different schemes with a professional adviser so that you make the choice that is right for you.
Here we run through the different types of equity release schemes and explain how they work.
How does it all work?
If you want some cash to pay for a holiday or to pay for a family party, you can take ‘equity’ from your home. Equity is the value of your home, minus any outstanding mortgage and equity release helps you to unlock this value and turn into a tax-free cash sum.
Different types of plans
There are several different types of plan to choose from. McCarthy and Stone have four options:

  1. Lifetime Mortgage. With this option, you release a lump sum from the value of your property, but you still own 100% of your home. This amount you borrow, with interest added, will need to be repaid from the sale of your home when you move into long-term care or pass away.
  2. Drawdown Lifetime Mortgage. The cash from the value of your home can be released over time when you need it, giving you more flexibility than you would have with a lifetime mortgage. This will help to keep the interest down as you only accrue interest on the funds once you have released them, so this can help to reduce the amount you pay over time.
  3. Interest-only Lifetime Mortgage. With this scheme, you take a lump sum and then you make regular interest payments on your Lifetime Mortgage so that when your home is sold you pay back the lump sum only.
  4. Home Reversion Plan. This involves selling some or all of your property in exchange for a lump sum. You still have the right to remain in your home, rent free, for the rest of your life.

Careful planning and the right guidance can help you to reach a sensible decision that could mean that your retirement is exactly what you hoped for.

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