In recent years, lower interest and annuity rates have reduced the income of many retired homeowners and, as such, property prices have increased and many people find themselves ‘property rich and cash poor’.
On paper, homeowners are wealthier than they have ever been, but because their wealth is tied up in their main residence, it cannot be used to help with living expenses or pay for those occasional treats and luxuries they were hoping to enjoy in retirement.
Whilst moving down the property ladder is a choice that suits many, those who wish to remain in their existing home can access some of the equity in their property by using an equity release scheme.
Types of schemes
There are two main types of equity release scheme. One involves taking out a lifetime mortgage against the value of the property. The other, known as a reversion scheme, involves selling all or part of the property to an investment company, whilst allowing the owners to live in their home rent free for the rest
