Equity release can be a great way to access the funds that you need to invest, give to family or simply enjoy a better quality of life. It is less well-known than other secured or personal loan options, and with many options available to home owners, the market for equity release products can be confusing to consumers unfamiliar with the concept. This short guide will help you to investigate how useful one type of equity release, known as home income plans, can be to you.

How does equity release through a home income plan work?

A home income plan begins with taking out a lifetime mortgage with a provider for a proportion of the value of your property. In return for this percentage of your home, the provider will give you an annuity. This is an extra income, paid to you regularly for the rest of your life, and dependent in value on your age and gender. As each annuity payment is paid out to you, the interest on the amount you have borrowed is deducted, meaning that by the end of the term, you will have no interest outstanding to pay. When you (and your partner, if applicable) have either died or gone into long term care, your house is sold, and the balance of equity borrowed is repaid to your provider using the revenue from the house sale.

Due to the nature of home income plans, the annuity received is reduced. That annuity, however, is fixed, and so you will have the peace of mind that comes with knowing that your income from your home will be safe for the rest of your life. You may have the option to take out a lump sum as well as your annuity in some cases, which can prove very useful during retirement if you need to improve your home or provide help for dependants. Home income plans are generally more suitable for older home owners of around 80 to 85 years of age, due to the fact that tax relief on mortgage payments is no longer available.

If you are of the suggested age and a regular income is important to you, a home income equity release plan could be the most suitable scheme for you. If not, however, there are still options available; you may wish to look into other lifetime mortgage or home reversion methods of equity release, information for which is also available on this site. You may also find the help of an independent financial advisor, or online comparison sites, useful in making a relatively quick and well-informed decision. Equity release will impact on the amount of equity you will have left to leave to beneficiaries, and for this reason it is important to give all of your options due consideration before making your decision.

This entry was posted on Thursday, January 15th, 2009 at 5:03 pm and is filed under Equity Release. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.