Types of Equity Release: The Difference Between Home-Reversion and Life Insurance
When you are considering the different types of equity release, there are two main types: home reversion and life insurance. Home-reversion releases funds from your property in order to provide a lump sum payment. Life insurance is more of an income stream that pays out monthly or annually for up to 20 years after your death. There are many factors to consider when deciding which type of equity release is right for you and your family’s needs. For more info, use this max equity release calculator.
First, let’s take a look at the key differences between home-reversion and life insurance:
Life insurance is a monthly or annual income stream that can last for up to 20 years after your death.
Home reversion provides you with a lump sum payment from the value of your property. This amount paid out will vary depending on many factors, such as current interest rates and how long you have left until retirement age. In addition, it may be possible to use home reversion even if you are still working full time.
Second, other aspects must also be considered:
Generally speaking, life insurance payments should increase over time to keep pace with inflation but this isn’t always true – so make sure this factor is properly factored in when deciding which equity release plan works best for your needs.
Third, you will also need to think about what happens if you move home.
With a life insurance policy, you can take the plan with you wherever you go – as long as premiums are paid.
However, with a home reversion agreement, you are tied to the property until it is sold. If you do decide to move, the new owner of your property would become responsible for the equity release agreement.
Fourth, when comparing different types of equity release plans it’s important to remember that there may be fees associated with each option.
For example, some life insurance policies come with an initial setup cost. However, this fee is often waived if payments are made by standing order or direct debit.