There are a number of different types of schemes and options available. The most common is the Lifetime Mortgage. The principle is that the lender will provide a loan secured on the property, up to a specified percentage of the value of the property, based upon the property owner's age. In general, these schemes 'roll-up' the interest payable on the loan until the property is sold as a result of the death of the homeowner or until the homeowner has to move into a nursing or care home. At this point the interest and the capital are repaid.
With the Home Reversion Scheme, you surrender some or all of the ownership of your property in exchange for a lump sum of money and the right to remain living in the house, rent free, for as long as you live.
The homeowner needs to bear in mind that both types of scheme will reduce the equity in the property and therefore the amount available as part of the estate for children and other beneficiaries. There may also be implications for eligibility for state benefits as a result of releasing capital.
A qualified independent financial adviser is able to explore the options and discuss the suitability of these schemes with homeowners and members of the family. Interest rates, terms and charges vary from provider to provider, so it is important to compare the different products available on the market. We are also able to take the wider context of estate planning and inheritance tax into consideration.