How To Release Money From The Value Of Your Home
When reaching retirement, your house can be a source of huge sums of money. The equity in your home is something you have worked all your life to have at your disposal, and it can be a perfectly safe and rewarding experience to release this money as you reach your twilight years.
Step 1: Downsize
If you have a large family home which is now too big for you, consider selling up and moving to a smaller property in a cheaper area. Do not sacrifice your happiness by moving to an area away from the things and people you love though. Moving is not cheap, but the return is well worth it in the end.
Step 2: Don't panic
If you do not want to downsize, you can take out a financial product for more money. Don't worry though, in this day and age you should never be in a situation where your debt is greater than the value of your home.
Step 3: Get good financial advice
The person selling you the equity release product should ideally specialize in them, or at least have a qualification in them. Do not be afraid to ask. The company should belong to SHIP - Safe Home Income Plans.
Step 4: Lifetime mortgage
With a lifetime mortgage you borrow money against the value of your house, but never have to pay it back (or the interest) whilst you are still alive. They guarantee never to enter negative equity, and it will only be paid from the sale of your home once you die or enter care.
Step 5: Home reversion
Home reversion involves selling a part of your home to an investor or insurance company. No money is paid out, but when you die they will receive their share of the sale and your heirs receive theirs. You can always go back and sell more if you need more money, and the amount you get will rise as house prices increase.
Step 6: Benefits
The benefits of releasing equity in these ways is that you get to keep your home which you have worked hard for, and stay around friends, family, and the area you know. And of course you make a bit of money in the process.
Step 7: Pitfalls
Pitfalls can include the fact that there may be no money left in the property for your heirs, which may come as a nasty surprise. If you are getting any means tested benefits from the state, you will almost certainly lose these if you release money from your home. Again, ensure you have a good financial advisor check whether it would be worthwhile to risk this.
Step 8: Think about your family
Your house is yours to do what you want with, but make sure you inform the family so they are not upset when it comes to receiving inheritance. Most children will be quite accepting of your rights to do this with your home, just make sure that all the documentation is readily available to them.
Step 9: Patience
The older you are, the better the deal is. You should ideally wait until you are in your seventies to start releasing money in your property. Make sure it is something you are 100% happy doing, and make sure you get the best deal possible for your situation.
