Reverse Mortgages/ Equity Release – Explained
by Mark Robinson, for Mortgage Genie, 12th September 2009
In a reverse mortgage agreement the houseowner receives payments every month, and in exchange agrees to give up the house once he dies or leaves the house. In the UK, these are more commonly known as equity release mortgages or equity release schemes.
Equity release mortgage offers opportunities for many families and very often it can provide an important source of income. Yet remember that you only have one house, so this opportunity will come only once. This is why you must make sure you choose the best program available. It is also worth noting that at this time equity release products are only available to the over 55’s, in effect, to augment a pension by releasing equity from your home if your mortgage is paid off or very nearly so.
The small print and terms with these products can be confusing and does seem like signing away your bricks and mortar. There are however very strict guidelines in relation to such schemes. It is still best however to stick to larger lenders or insurance companies for equity schemes. If in doubt, always consult a trusted financial adviser.
It is a good idea to check how the equity release mortgage agreement will affect your standing with the government. Will you still pay property tax on you house? Will you pay tax on the income from the equity release? Will it reduce any benefit payments you might be receiving? If the answer is yes, it might make the deal less desirable, yet too many people find that out only after signing it.
As I said in the beginning, you have only one chance at equity release scheme mortgage, so do not rush it. Weight your options, compare the different programs you are offered, consult with friends who tried it, and only then make you choice. Good luck!