The bigger question is “Why are you asking, what is your pressing need now and going forwards?
If you are in a position where you need money to come out on and live on or you are looking to carry out repairs on your home then sure it makes sense to investigate the alternatives.
A reverse mortgage results in putting you further and further into debt whilst using equity in your home as security for the lending institution. In essence it is a Loan and the lender expects you to pay back the loan + interest. Can be a very expensive and punitive way forwards to overcome your current financial needs and requires a lot of thinking before you commit yourself to a reverse mortgage.
The institution giving you the reverse mortgage wants to make a profit and secure the loan. Fees and interest rates could be higher than standard mortgage rates, check them out before you commit.
An Equity Release program is more gentle on your money whereby you ‘grant the institution access to a certain percentage of your home so that when you sell at a time in the future (or the home is sold out of your estate) the institution you have sold a share of the future sale value of your home will collect what is due to them and the balance goes back to you or your estate.
The institution will determine how much cash they can give you now based on a formula on the future value you wish to sell them today. You receive a cash lump sum and the institute hold title over the agreed percentage you have now just sold to them. This then comes out of the future sale proceeds of your home.
You still live in your home (or rent it out) and it is not a loan so there are no interest charges … only the future value of your home. There is no requirement by them that you have to sell and you remain the legal owner whilst at anytime you can buy back the old share and at a formula for ‘early’ termination.
Perhaps a more useful and financially beneficial strategy is to work with a professional organistion who will look to how best to add value to your home upfront before you sell … the purpose being so that you can sell for more and thus have more in your pocket to retire on and Downsize into.
For any homeowner concerned about downsizing, ongoing maintenance to existing family home, equity release, reverse mortgage or cash flow problems now or going forwards your first point of call is working out how much your home is worth today, is there a strategy to add value (through a clever renovation or even subdivision and build) so that you can sell for more than you would have gotten if you gave it to your local agent with a coat of new paint and their display furniture making your home look more presentable?
How much is my property worth?
Why not just go to my local real estate agent?
