Kevin Mills
Releasing Equity for Income
Many have written before on the merits of using an Equity Release mortgage in retirement to release a cash lump sum from your property to spend as you wish or invest to provide additional income. Assuming you only needed more income you could invest the lump sum to provide the extra income required. For example if you released £60,000 from your home and was able to secure an investment paying 5% pa – this would produce an income of £250 pm. However, some Insurance Companies now also offer an alternative option to releasing a lump sum so you can release a monthly cash sum for the rest of your life.
Releasing a monthly income rather than a lump sum has its benefits. The monthly income payment from this arrangement is usually more than what you could achieve if you took a lump sum and invested it. Also the interest you are charged on this version rolls up at a smaller rate because you are only charged on the money you have received.
Some providers will also let you have a combination of a lump sum and a monthly income. This means you can tailor the mortgage to suit your needs within their limits. If you don’t want the maximum they will lend you, you can take what you need now as you can always go back to them later and borrow more up to the maximum limits.
However, to provide you with maximum flexibility you need to choose a lump sum and monthly income at outset. This would give you the flexibility to increase either the income or draw on more capital if needed in the future. If you require income only you could take the minimum lump sum to offset some of the charges (valuation fee, solicitors fees etc) when taking out the mortgage. Conversely if you only required a lump sum at the outset they could set it up with a minimum income. This then gives the flexibility to increase either at a later date.
They can allow you to protect a portion of the eventual sale value of your home providing peace of mind that you will be leaving a guaranteed percentage of the property’s eventual sale value to your beneficiaries. What’s more, you can choose what proportion you would like to protect from between 10% to 50%.
Please be aware that there are many schemes available to you from many different lenders, each having their own unique features. It is therefore imperative that you seek Independent Financial Advice before proceeding. An IFA will research all the schemes available to ensure that you find a plan which best meets your needs.
This is a Life Time Mortgage. To fully understand the features and risks, ask for a personalised illustration using our contact page.