It is a common problem that many people in retirement are asset rich, but cash poor, and many find that the majority of their wealth is tied up in their home.
There are several options available to people in this situation, one such option would be to simply downsize, thereby allowing the funds left over to be used to spend on other things, go on holiday, or supplement their income.
However, this isn’t always the desirable option. For example, if someone has lived in the same property for many years, they may not want to move!
So, what other options are there? well another option could be to look at equity release, also known as lifetime mortgages.
A lifetime mortgage is a loan that is usually based on a percentage of the value of your property, typically between 10% and 50% but unlike a ‘normal’ mortgage the loan doesn’t usually need to be repaid until your death (or death of the last survivor on a joint loan) or sale of the house whichever happens soonest.
- You can choose a lump sum or regular payments
- Payments are tax free
- You retain ownership of the property
- No payments need to be made until your death or if you sell the property
- Mortgages can be transferred to a new property in the event of you moving house
- The amount you leave your beneficiaries after your death could be significantly reduced over time
- Compounding interest rates can result in the loan amount increasing significantly when not making interest payments as you would on a conventional mortgage.
- Paying off the loan early usually results in early repayment charges being payable.
There are several types of lifetime mortgages, all different in their own way, and I would strongly recommend you talk to us to discuss the various types available as well as talking to your family before pursuing this as an option.Back to articles