Lifetime Mortgages Explained:
Home income plans
Home income plans provide a way to use the money raised by mortgaging your property to generate monthly income. This is done by purchasing an annuity which will provide you with a monthly income for the rest of your life. The mortgage still has to be repaid but these charges should be deducted from your annuity payments before you receive them.
Home income plans tend to only be available to homeowners over the age of seventy-five, but check around to see what you can find.
When entering into a home income plan to release equity in your home think carefully about the annuity that you will be entering into. It is especially important to consider weather you will receive a fixed monthly payment or whether this will fluctuate depending upon interest rates. If you are confused, make sure you seek financial advice.
Some Home income plans also offer the option to receive a cash lump sum at the time of taking the loan, bear in mind this will obviously reduce the monthly income you receive.
Pros: Income can be guaranteed by opting for a fixed interest rate loan.
Cons: Funds paid into the annuity will belong to the plan provider when you die, unless you purchase capital protection when taking out the loan. Since the removal of MIRAS (Mortgage Interest Relief at Source) tax relief in 1999 you will receive less money than you would have in the same scheme if you had taken it out before 1999.
Other Types of Equity Release Plans:
Life Mortgages
You may also want to consider a Home Reversion Scheme, clcick the link the to find out more.