What is Equity Release?
Equity Release is a type of scheme that allows you to access your Homes Value for more money in your retirement but it is costly and a Lifetime commitment, It allows you to tap into any wealth that has Accrued in your property without having to actually change where you live. Doing this on a Shared Ownership property is entirely possible but often you will get less of a payout depending on the amount of the property share you actually own. There are 2 types of Equity Release Scheme “Lifetime Mortgage” and “Home Reversion Scheme”. These Schemes can be tricky for any properties that you dont want to live in permanently so consider it careful especially if it is your first House.
Lifetime Mortgage – Equity Release
With a Lifetime Mortgage you could be lent a proportion of your Houses Value, Interest will be charged on this but you do not have to pay it back until you decide to sell your house or die. A Life time Mortgage can be costly and end up with you paying out up to 3 times more that what you could borrow over 20 years. The Interest is compounded over the whole period so you could end up dealing with double the debt at current rates. The Valuation of you house will be affected by your house being a Shared Ownership Property (unless you own 100% of it) so the amount you will be lent will be affected by this.
Home Reversion Scheme – Equity Release
With this Scheme you usually sell a portion of you property to the lender for under the market cost and then they allow you to stay in this Home permanently but when you move on from this Property they then get the another equal portion of the Sale price (ie if you originally sold them 40% of your house, when it is sold they will receive 60% of the Value it sold for). Home Reversion Schemes demand Demand 70% of the properties value for just a 20% advance. For this to work under Shared ownership you must own 70%+ of the property or you cannot sell them that much.