Equity release plans and retirement mortgages are growing in popularity and offer a real financial solution to retirees who would otherwise struggle to retain their own home whilst surviving on ever-growing living costs.
Before selecting either of these types of plans it is important to shop around using either a price comparison website or by approaching reputable financial institutions to see what they offer. There are a range of Halifax retirement mortgages offered by third party financial providers. These include either the equity release plan or the Retirement Home Plan. Both of these plans offer a way to access equity tied up within the home, however, are different in that the latter involves monthly repayments whilst the former does not.
Monthly repayments can be advantageous for those who wish to maintain the outstanding loan balance at a fixed level. Without monthly repayments to cover the interest then an equity release plan essentially grows as the interest is rolled up within the loan. This means that the following year interest is accrued on a larger amount giving it a compound effect.
Reputable equity release plans that comply with the Safe Home Income Plan will offer a guarantee that the loan to be repaid can never be greater than the value of the house. In this way equity release plans do have a safety net. However, upon death, they must still be repaid. If your house price has stayed static and the loan has grown it may be that your entire estate is swallowed up by the equity release plan. This is important to understand as many people do wish to leave an inheritance for their families.
For this reason a Retirement Home Plan may be preferable as it allows a homeowner to at least maintain the balance of the loan at a fixed level which will then give them a clearer idea of what will be available for their family in the event of their death. This can also give peace of mind that you are leaving loved ones a degree of financial stability.