Equity Release Types: The Different Ways to Make Home Ownership More Affordable
If you are thinking about using equity release to help with your cash flow, it is important that you understand the process. Equity release is a way of accessing money from the value in your home. There are two types: lifetime mortgages and annuities. Lifetime mortgages allow you to withdraw a lump sum or monthly payments for life, while annuity products pay out a fixed amount each year until death.
Lifetime mortgages allow you to withdraw a lump sum or monthly payments for life, while annuity products pay out a fixed amount each year until death. Annuities have been around since the 1980s and are regulated by the Financial Conduct Authority (FCA) – so they offer more protection than lifetime mortgage providers who are not FCA authorized. They also typically charge lower fees than lifetime mortgages because their income comes from interest on investments rather than repayments of your loan capital over time. There is an important difference between equity release and remortgaging – if you take cash out via equity release, it will reduce your home’s value; remortgaging does not affect your home’s value.
Another difference between equity release and remortgaging is that you can still live in your property if it’s leased out. With an annuity, the income could be reduced by a tax charge on rental income.
It may also help to take legal advice before deciding which type of product suits you best; talk to Independent Financial Advice (IFA) or other financial advisers about how this option might work for you now and in the future; discuss with family members what they think as well because it will affect them too.
Providing there are no issues with valuation, lenders will usually agree upfront fees within their ranges – but these vary from lender to lender so ask around first for quotes.