Lifetime Mortgages and Long Term Care

Equity Release
To understand the features and risks of Equity Release, ask for a personal illustration

Before deciding to consider Equity Release, consider downsizing or taking a lodger.

Equity Release is either of a Lifetime Mortgage or a Home Reversion

Lifetime Mortgages are when a set amount is borrowed against the value of your home, as a lump sum or when it is needed. It is a long term loan that is repaid when the home is sold.

The advantages of the Lifetime Mortgages are that the mortgage can be drawn at any time after age 55, and the home continues to be owned by occupier. At the start you will know the amount that can be borrowed and as the owner benefits from house price rises, there is a possibility of leaving a legacy to heirs. We only recommend a provider who is a member of Safe Home Income Plans (SHIP), so that you can have no negative equity. The loan is regulated by the Financial Services Authority (FSA).

However, the disadvantages are that the loan will grow, with interest added, as time passes, so all of the equity in your home may be exhausted. Your tax position and means tested benefits may be affected. There may be nothing left for the family to inherit, and your options may be affected when selling or moving from your home.

Home Reversions requires the sale of a part of, or all of your home to the provider. You then receive an income or a lump sum, and can remain in your home rent free (or pay a nominal rent) for the remainder of your life.

The advantages are that you know the proportion of your home being given up, and you can leave a legacy of the remainder. The sum released will usually provide an income for life. The arrangement is regulated by the FSA.

The disadvantages are that you become a tenant in your own home as the ownership transfers to the provider; the income is for life, so the amount you receive depends on how long you live; your tax position and means tested benefits may be affected. You will only benefit from the house price rises in the proportion that you retain. Were you to repay the plan early, additional charges would be applied.

Long Term Care
The current legislation in England and Northern Ireland is that anyone with assets, including property after three months, in excess of £22,500 will not qualify for any means tested support for their care. (Other rules apply in Scotland and Wales). In the South East, the average shared room in a residential home now exceeds £500 per week. There has been very low take up in pre-funded long term care and so we consider long term care as an immediate need.The majority of plans arranged are as Immediate Needs Annuity, Investment Bonds or Equity Release. We look at the implications on those plans as they affect the individual and the family.

 

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