Should You Choose Lifetime Mortgages Or Home Reversions?

By 2nd July 2019Blogs

It is always important to choose the right equity plan and the best option for your circumstances and requirements. This means choosing between lifetime mortgages or home reversions, so it is important to understand their differences, drawbacks and benefits.

Essex Equity Release have dealt with many clients in the past and can always provide you with extensive advice regarding equity plans.

What Are Lifetime Mortgages & Home Reversions?

Lifetime mortgages and home reversions are the two types of equity options you have available when looking to release equity from your home. Both equity types have several similarities, with the main difference being lifetime mortgages allow you to take a loan out against the value of your home, whereas home reversions allow you to sell part of your property to a third party.

Both equity options offer a fantastic choice to all homeowners, as long as you are aged over 55 years old. Both equity plans will allow you to make repayments when both you and your partner have passed away or moved into long term care, meaning your home is vacant and can be sold for repayment. This is when your plan will come to an end.

Lifetime Mortgage Equity Plans

Lifetime mortgages allow you to borrow a percentage of the value of your home. With a fixed interest rate for many plans, this ensures when your house is sold and the plan comes to an end, your repayment will have to be made. With lifetime mortgages, you can choose to make repayments on a monthly basis or let your interest roll-up and make a final repayment at the end of the plan. The latter is often the most popular choice as you don’t have to worry about repayments until the house is sold.

With many of our plans, if you choose to make an early repayment, it could come with an additional charge. This is something you should always consider when choosing your plan so that you find a plan which meets all the criteria you require. Lifetime mortgage loans will continue until you have left the property. The sooner your property is sold, the sooner you will have to make repayments. This could also mean the interest you pay is not as high.

With lifetime mortgages, you should always know how much money will be owed when the house is eventually sold.

Home Reversion Equity Plans

Home reversions are less popular than lifetime mortgages but can still be the best option for you and your partner. Similar to lifetime mortgages, you will be able to stay in your home, rent-free until the property is sold. One of the big differences that works against home reversions is the fact that you sell part of your property.

This means you no longer retain full ownership of your property as part of this will be sold to a third party in order to release equity. Instead of repaying a loan when the property is sold, your repayment will be made as soon as the sale of your home has been completed. As you do not retain the sole ownership, the percentage of the property you do not own will be sold to the third party. The advantage of using this plan is that there is no build up of interest.

What Are The Similarities?

Whilst there are a few differences between lifetime mortgages and home reversions, they are both fantastic options. Both plans ensure you can stay in your home without having to pay rent and the money you receive from releasing equity can be used for any purposes you require.

Additionally, with the plans available at Essex Equity Release, you are assured of a no negative equity guarantee. This guarantees all our clients that the repayment you make will never be more than the value of your property, therefore eradicating any potential debt that could be leftover. Both equity options also allow you to ring-fence a percentage of your property and leave this value for your children or other beneficiaries, so you can always leave an inheritance if this is something you are worried about.

Essex Equity Release have several plans available from different providers, ensuring you can always find a suitable plan for you with a good interest rate that allows you to gain as much money as possible whilst still leaving an inheritance.

Contact Us

If you would like to discuss equity release plans and the choice between lifetime mortgages and home reversions, contact Essex Equity Release today. We can always provide a fast response and talk you through all the plans available. Call us today on 01268 799211 or fill in our contact form to make an enquiry.