Reverse Mortgage Schemes

A reverse mortgage scheme is way to make use of the equity locked up in your existing home. It can be particularly beneficial for those who have reached retirement, but, want to continue living in their home for as long as they live.

Basically, a reverse mortgage plan involves selling your house to a equity release firm. They then give you a lump sum or annual payment and also allow you to live in the house for as long as you want. After your death, the equity release firm will sell the house and keep the proceeds. Usually they only buy a 90% stake in the house so the remaining 10% will be distributed to your heirs.

The main disadvantages of reverse mortgage schemes are that

  1. You will have a lot less to leave in your will. It depends how important this is to you.
  2. If the house appreciates in value, you will miss out on the capital gains.

However, if you don’t mind the above 2, a reverse mortgage plan can give you a much more comfortable retirement. The value of your house is only use to you if can access the equity which is usually locked in.

Alternatives to Reverse Mortgage Schemes

  1. Downsize. Move to a smaller house or different area. Use the difference in house values to boost your pensions.
  2. Build up a bigger Pension, so that you will not need to reverse mortgage your house.