What is equity release and should you consider it?
By Caroline Bloor
If you are a homeowner in later life, you can borrow money against the value of your home, paying nothing back until your home is sold - either after you die or if you go into a care home. Aternatively, you can sell your home - or part of it - but continue to live in it until you die or are ready to go into a care home. You need to be over 55 to opt for equity release, must have a very low or no mortgage, and your house must be in good condition.
Lifetime mortgage: you take out a loan secured against your home; you keep full ownership but pay a mortgage on it, plus interest. The mortgage is repaid when you die or move out. Ensure the scheme you consider guarantees the repayment never exceeds the value of your home. Find out, too, if there's a drawdown option.
Home reversion: you sell your home (or part of it) and receive a lease to allow you to live their either rent-free or for a low amount until you die or move into a care home. Ensure you check the terms of the lease before considering this option.
Sale and rent-back: you sell your home and rent it back for a fixed amount of time. Check the tenancy agreement carefully and, for your own protection, ensure the provider is authorised by the FSA.
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