What’s the best way to release equity for home improvements?

Q. I would like to know more about equity release. I am a homeowner with no mortgage on my house. I cleared my mortgage back in 2013 when my endowment policy reached maturity.

I would like to make some changes to my home, including installing PVC windows and external doors, as well as having a bit of landscaping done. I am approaching my 64th birthday and live alone, and hope to release some of the equity in my home. Can you please point me in the right direction?

A. The most popular way of releasing equity is by taking out a lifetime mortgage, which is an option for homeowners aged 55 or over. You can borrow up to a maximum of 50% of the value of your home dependent on age and release the money as one large lump sum or as several smaller amounts.

As with a normal mortgage, interest is charged on the amount you borrow, but unlike a normal mortgage, you can choose not to make monthly repayments and allow the interest to be rolled up, which means it is added to the loan. The loan amount plus the interest added to it is repaid when the house is sold either after your death or because you move into long-term residential care.

You also have the option of “home reversion” where, provided you are at least 60 or 65, you sell part or all of your home to a provider in return for a cash lump sum and the right to carry on living in the property rent-free until your death. There’s no interest to pay with home reversion but you will normally get between 20% and 60% of the market value of the portion you sell to the home reversion provider. So, for example, if your home was worth £200,000 and you sold half of it, you would get between £20,000 and £60,000, and not the £100,000 that the half is worth on the open market. The older you are the more you get.

To decide which option is best for you, contact Release My Equity to get expert advice from an adviser who can search the whole market and who has the specialist equity release qualification.

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