Many people want to do things that would be considered a luxury during their retirement years in order to make their retirement more enjoyable.
A good example of this would be to carry out some home improvements, as you spend a lot more time at home during retirement than you would during your working life. But it may be the case that the pension savings you have amassed do not allow for this kind of expenditure, so this is where something like equity release can be a real boon.
An equity release plan is something that you can buy into to free up some of the financial value from your home without needing to sell or move out. The four main types of equity release schemes are explained in detail on the Age Partnership website. Age Partnership is an independent company that offers financial advice and solutions to those aged over 55. It will search the entire equity release market for its customers to find them the best possible deal, so it takes the headache out of getting different quotes from different equity release providers.
The Age Partnership equity release schemes include the lifetime mortgage, where you take out a lifetime loan against the value of equity held in your property. The loaned amount is not repayable until after your death. When your property has been sold, the equity release provider will take the loan value, together with the sum of interest accrued, from the proceeds of the property sale.
Other variations on this include the lifetime interest only mortgage, where you pay back the interest on a monthly basis from the start of the loan period. This has the advantage for the beneficiaries of your estate that only the initial loan amount will be payable after your death. You can also choose to take equity release in the form of a drawdown lifetime mortgage, where you take smaller cash amounts as and when you need them. The advantage here is that the interest payments will be smaller.
The other option with equity release is to take out a home reversion plan. Here, you sign over partial or whole ownership of your property to the equity release provider, but can remain in your home rent-free for the rest of your life. The provider receives their share in your property’s value after your death when the property is sold.
Equity release schemes cannot be changed once you have entered into them, so make sure you fully understand the terms and conditions before you enter into an agreement.
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