Versions of Home Equity Release
Not all Home Equity Release schemes are the same
There are two completely different forms of Home Equity Release available to those in their retirement years:
- Home reversion schemes, in which you are not borrowing against the value of your home but rather selling part of it. This is really a property transaction in which you give up full ownership of your house. Seniors Money International does not offer home reversions.
- Lifetime mortgages (sometimes called reverse mortgages), in which you borrow against the value of your home and retain 100% of it. The loan is not repaid until you permanently move out or upon your death, so it grows over time as interest is added to the balance. Seniors Money International only offers lifetime mortgages.
Not all lifetime mortgages are the same
Lifetime mortgages are available as either fixed rate loans or variable rate loans.
- Fixed rate loans allow you know in advance exactly how much the loan will grow to over a specified period, irrespective of fluctuations in market interest rates during the period. However there is limited flexibility in how and when the money can be borrowed and fees to be paid if the loan is repaid early.
- Variable rate (sometimes called floating rate) loans allow great flexibility, both at the outset of the loan and into the future. Most people under-estimate how long they are going to live for and how much their circumstances can change in retirement. Fluctuating interest rates do not affect the borrower month to month (there are no monthly repayments being made) whilst studies show that over long periods fixed rates invariably cost more than variable rates.
Seniors Money International believes that variable rate loans are more suitable for people in the retirement stage of life so we offer that option in all our countries. In some countries we also offer the fixed rate option which may be appropriate over short terms for some customers.
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