What is Equity Release?
Equity release is sometime referred to as a 'reverse mortgage' which means that in return for releasing tax-free cash from their home, the client makes no repayments of interest or capital during their lifetime.
Instead, interest owing is added to the initial borrowing and future drawdowns. When the client dies (or enters long-term care), the original loan plus the interest which has accumulated (or 'rolled up') on the loan is repaid to the product provider, usually from the sale of the property, with the remaining balance being passed back to the estate.
How safe is Equity Release?
All plans which are approved by Safe Home Income Plans (SHIP) allow the homeowner to:
- have a guarantee from the product provider that they will never owe more than the value of their home
- will be guaranteed the right to remain in their home for life
- will be able to move to a new home and keep their equity release plan in place without penalty
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