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Types of Equity Release

Types of Equity Release in Northern Ireland

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Types of Equity Release Belfast

Last Updated: 4th December 2024

At AIMS-NI, we specialise in helping homeowners across Northern Ireland unlock the value tied up in their properties through equity release. Whether you’re looking to supplement your retirement income, make home improvements, or give a gift to your loved ones, equity release could be the solution you need. As Northern Ireland’s leading mortgage and loan advisory service, our expert team offers clear, professional guidance to help you understand the different types of equity release schemes available to you.

What is Equity Release?

Equity release allows homeowners aged 55 and over to access the wealth tied up in their property without having to move. It can provide a tax-free lump sum or a regular income to help cover expenses, from healthcare costs to everyday living. At AIMS-NI, we help you explore your options and find the right solution, whether you’re looking for flexibility or a straightforward lump sum.

Equity release comes with important considerations, which is why it’s essential to seek expert advice. We offer impartial, whole-of-market advice to help you make an informed decision and ensure the best possible outcome.

Types of Equity Release Schemes

There are two main types of equity release schemes: Lifetime Mortgages and Home Reversion Plans. Each offers different ways to release the equity in your home, depending on your needs and circumstances.

Lifetime Mortgages

A Lifetime Mortgage allows you to borrow money against your home while maintaining ownership. With this option, you don’t make monthly repayments. Instead, the loan and interest are repaid when you pass away or move into long-term care.

Key Features of Lifetime Mortgages:

  • No monthly repayments: Interest is added to the loan balance and paid off when the property is sold.
  • Retain ownership: You continue to live in your home for as long as you wish.
  • Loan amount: The amount you can borrow is based on your age, the value of your home, and sometimes your health.
  • Flexible options: Some plans allow you to make voluntary repayments, helping reduce the amount of interest accrued.

Benefits of Lifetime Mortgages:

  • You can continue living in your home for life.
  • You only pay interest when the loan is repaid.
  • Potential to access a significant lump sum or regular income.

Considerations:

  • Interest compounds over time, which could reduce the value of your estate.
  • It may affect the amount of inheritance you can leave behind.

 

Home Reversion Plans

A Home Reversion Plan involves selling a portion or all of your property in exchange for a lump sum or regular payments, while retaining the right to live in your home rent-free for life. The provider will then take ownership of the sold share when you pass away or move into care.

Key Features of Home Reversion Plans:

  • Sell a portion or all of your home: You receive a lump sum or regular payments in exchange for a percentage of your property.
  • Stay in your home for life: You can live in the property rent-free for as long as you want.
  • No interest to pay: Unlike lifetime mortgages, you don’t have to worry about accumulating interest.

Benefits of Home Reversion Plans:

  • No interest charges, so the debt doesn’t increase over time.
  • Guaranteed tenancy for life.

Considerations:

  • You give up part of the ownership of your property, meaning you can no longer benefit from any future rise in the property value.
  • It may not be suitable for those who want to leave their property fully to their heirs.

Additional Features of Equity Release Schemes

There are several features that can be included in your equity release scheme, allowing you to tailor it to your needs.

Protected Equity

Many equity release schemes allow you to protect a certain percentage of your home’s value for future generations. For example, if you choose to protect 30% of your property’s value, that 30% will remain intact for your beneficiaries, even if you release a larger proportion of the property’s equity.

Key Benefits of Protected Equity:

  • Ensure a portion of your home’s value remains for inheritance purposes.
  • Provides peace of mind knowing that your loved ones will receive a fixed percentage of your property.

Impaired Life Equity Release

Some equity release providers offer higher loan amounts if you suffer from a medical condition or have a shorter life expectancy due to ill health. This is known as Impaired Life Equity Release, and it can allow you to release more equity than you would otherwise be able to.

Who Benefits:

  • Homeowners with chronic health conditions or other health-related issues.
  • Those who might otherwise be unable to release as much equity.

Income-Based Equity Release

For those who need a steady cash flow, some equity release schemes offer the option of releasing funds as an income, rather than a lump sum. This is ideal for homeowners who are looking for a way to supplement their retirement income.

Benefits:

  • Provides regular income to cover everyday expenses.
  • Flexible payments that can be adjusted according to your needs.

Flexible Drawdown

Flexible Drawdown plans allow you to access a pre-agreed “cash reserve,” similar to an overdraft. This means you can release funds as you need them, rather than all at once. Interest is only charged on the amount you withdraw, making this a more cost-effective solution for some.

Key Features:

  • Withdraw as needed: Like an overdraft, only pay interest on the amount you use.
  • Ideal for home improvements, medical expenses, or special events.

Considerations:

  • This can be a more complex option that requires careful management.
  • While it offers flexibility, costs can escalate if large sums are withdrawn frequently.

Choosing the Right Equity Release Scheme for You

Choosing the right equity release scheme depends on your individual circumstances, goals, and future plans. It’s important to carefully consider:

  • How much equity you want to release.
  • Whether you want to leave a legacy to your heirs.
  • Your health and life expectancy.

At AIMS-NI, we understand that every client’s situation is unique. Our expert advisers will guide you through the options and help you choose the best plan for your needs.

How AIMS-NI Can Help with Equity Release

As Northern Ireland’s largest directly authorised mortgage brokerage, AIMS-NI offers expert advice on all aspects of equity release. Our independent, whole-of-market service means that we can access a wide range of equity release providers and tailor a solution to your specific needs.

Contact Us for a Free Consultation

If you’re considering equity release or just want to explore your options, contact AIMS-NI today. Our friendly consultants will provide you with all the information you need to make an informed decision.

Get in touch today to begin your journey towards financial freedom and a more comfortable retirement.

Disclaimer

EQUITY RELEASE PRODUCTS INVOLVE BORROWING AGAINST OR SELLING PART OF YOUR HOME. THERE MAY BE MORE SUITABLE METHODS OF RAISING THE FUNDS YOU NEED.

A LIFETIME MORTGAGE CAN QUICKLY ERODE THE REMAINING EQUITY AND AS A RESULT THERE MAY BE NO VALUE LEFT TO PASS ON.

EQUITY RELEASE MAY REQUIRE A LIFETIME MORTGAGE OR HOME REVERSION PLAN. TO UNDERSTAND THE FEATURES AND RISKS, ASK FOR A PERSONALISED ILLUSTRATION.

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