As individuals approach the retirement age, one big question always comes to mind…how will they live and manage without an income? A number of schemes to ensure retirees and others facing a similar situation don’t just simply starve off all neglected.
Pension schemes are among the most popular modes of guaranteeing a comfortable life after retiring; however, there are other ways to keep yourself out of the cold. In the UK, there is also an option called equity release schemes. They include either lifetime mortgages or home reversion plans. Lifetime mortgages used to be quite popular back in the day but as a result of falling equity release rates, they lost some of the market share. Recent changes and stricter regulations however have seen it slowly come back into the limelight as an equity release scheme of choice.
In this case however, we want to focus on home reversion schemes. What they are and what they are all about and how they can be beneficial should you opt for them.
To put it in relatively simple terms, a home reversion plan is a scheme whereby you can sell all or part of your home to a reversion company. In return for this sale aside from gaining a life-time lease, you can be guaranteed either of the following:
- A consistent income
- A one-time lump sum of money
The life time lease is in other words an agreement that you can still stay at your home over the course of this process until you pass or happen to end up in an assisted living institution.
This being a serious commitment with regards to both your life and wellbeing as well as financial situation, it is imperative that you take a close look at what you are getting into and what is involved. We look at a few factors to consider when settling on a home reversion plan for yourself:
Finding a suitable Advisor
|For many clients, this is an important factor when signing up for essentially any type of equity release scheme. The investment, in the event of the applicant’s passing, can be paid out to whoever is named in the contract agreement and one should insist for contractual agreements towards this end.||It is important that one not dive into any kind of agreement without looking into what is entailed in it. Research the equity release costs of whatever scheme you want to go for so you can have a clear image of what to expect over the course of the agreement.||Equity release plans do not only come in the form of home reversion plans but also in the form of life mortgages. Some life mortgage rates have offers going up to 3% interest rate which is not a bad deal, but all in all, getting the proper financial advice on which of these two to go for is essential. Upon settling on either one, let the expert aid you in setting it up so that you do not miss a thing.|
1. It is an efficient way to ensure you receive money to deal with your daily living costs as well as other issues that may come up.
2. The agreement is flexible in that despite having sold part or all of your home, you still get to stay there till you pass on or until you need to go into aided care institution.
3. The profits that will eventually be raised off of your property will be tax free.
4. Entering into this sort of scheme can be a great help towards lessening tax-inheritance related costs.
5. The option of selling part of your property means that there is room to leave something for your estate to inherit.
1. At the end of the day, you will receive a notable less amount of value for your property rather than the full market value.
2. Quite a number of fees have to be paid for in order to actualize this kind of agreement.
3. In the bigger picture, going for a home reversion plan may significantly reduce the support you’re to receive from the government or local authority. This is because your earnings from the scheme will more than inevitably have an effect on your situation’s assessment.
4. Deciding to opt out of the scheme early may prove costly and eventually lead to losses.
Now that you know what home reversion plans are and their advantages and disadvantages, you can determine if it is an option for you.
You can write to us and let us know what you think or what you need. We will get back to you.
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