Factor |
Equity Release Mortgage |
Home Reversion |
Amount
released |
Generally used for smaller amounts,
to raise an instant cash lump sum. |
Upto 100% of the value of the property
can be released. |
How
interest is calculated |
As a percentage of the yadvance
- as with any other loan. |
No interest charged. Lenders take
equity stake in property. |
Protection
against rising interest rates. |
Loan can be capped. |
No risk, as no interest charged. |
Protection
against falling value of property. |
Can be protected by "negative
equity guarantee". |
Lender shares risk with you, or
takes all risk if 100% equity released. |
How
your house will be valued. |
As normal. |
Lender will base equity released
on reduced value of house, depending on your circumstances,
and because you may continue to live there effectively "rent
free" if lender owns 100% of equity. |
Can
you move house? |
Property may be sold, with proceeds
from sale used to repay equity release loan. |
As the lender may own the majority,
or all of the property, it can be much harder to sell. |
Can
you extend or repay your loan. |
Yes, as exactly as you would with
any other loan. |
No |
Suitable
to leave property as inheritance |
Providing the property is worth
less than £240,000, it can be left to your heir(s), with
no additional payments needed beyond repaying the equity
release loan. |
Not suitable, as the lender owns
the property. |
Suitable
for cash inheritance. |
Yes, cash released can be used
for any purpose. |
Yes, cash released can be used
for any purpose. |
Useful
to reduce inheritance tax liability |
Yes, if cash is "gifted"
at least 7 years before death. This can save having to gift
a whole property. |
Yes, cash value of house is available,
although there may be no equity in the property to inherit. |
