Various Home Equity Loan Types

Equity release plans are becoming more and more popular for people who are looking to fund their retirement by cashing in on the value of the property they own. It is important to note that there are various plans to choose from, and not all of them are the same. By gaining a proper understanding of the advantages and potential disadvantages of each and every plan option, homeowners will be better equipped for making the right decision.

Lifetime Mortgages

This type of equity release allows the homeowner to secure a lump sum amount (tax-free) against the value of their property. The compound interest will only be due for payment upon their death or if they are to relocate to a permanent care facility. This is a particularly popular option since no monthly repayments are required. It is also a popular choice for those who wish to use their equity release to buy an additional property or pay for large-scale renovations to their home.

Drawdown Plans

These plans bear some similarities with lifetime mortgages. The most significant difference is that homeowners can access their funds in stages instead of a lump sum. This is quite a popular choice for those looking to subsidize their pension.

Enhanced Plans

These plans make it possible for the homeowner to release more funds than would ordinarily be possible. They are particularly handy when homeowners need funds to cover medical expenses.

Home Reversion Plans

This is another highly popular option since it allows homeowners to sell a portion of their home. The will still live in their home rent-free and enjoy property value increases as time passes.

Interest Payment Plans

These plans are somewhat similar to lifetime mortgages. The main difference being that homeowners can make monthly payments. These monthly payments are made in order to cover the interest rather than letting it accumulate and become payable once the plan comes to an end.
As you can see, each of the plans mentioned above has its fair share of benefits. Not every plan will suit everyone, and this is exactly why it is so important to seek independent financial advice. An independent advisor will be able to help you identify your most important needs and, with these in mind, can then suggest the best plan or plans from which you may choose. In some cases, plans can be adjusted slightly to suit your needs and it is certainly worth asking about before you sign any agreements.

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