You may have heard about ‘lump sum’ equity release plans and need a little more information to decide whether such a plan could be the right one for you.
On this page, we’ll give you a full explanation of how a lump sum plan would work, answer some common questions and give you some pointers around the next steps to take if you’d like to talk to someone in a little more detail.
What is a Lump Sum Plan?
When people think about equity release, a lump sum plan is often the first thing they imagine. Lump sum plans are relatively uncomplicated and offered by the majority of equity release or lifetime mortgage lenders.
A lump sum plan works by first choosing the amount of equity you would like to release from your property. Commonly, this is a large percentage of the equity, freeing up a larger single amount of money now – but limiting the amount that could be accessed in the future.
This amount of money is the provided by the lender and secured as loan against your property, usually with a fixed rate of interest applied.
As a ‘lifetime mortgage’ product, those taking advantage of a lump sum plan can live in their home for the rest of their lives – and the mortgage is repaid solely from the proceeds of the house sale when the applicant or applicants pass away. What’s more, there’s no danger of debt being passed on to your family or loved ones as part of your estate – any shortfall is handled by the lender.
Benefits of a Lump Sum Plan
For many, the sheer simplicity of a lump sum plan is attractive – and it’s attractive for lenders too, as no provision has to be put into place for the on-going administration of the plan at their end.
This simplicity, particularly for lenders, often leads to lower interest rates than you might see with other lifetime mortgage products, helping to maximise the amount that can be borrowed.
As the name also suggests, a lump sum plan is ideal for someone who’s financial goals would benefit from a large injection of tax-free cash. Of course, almost everybody’s goals are different, so talking to one of our advisors about exactly what you’re looking to do can be helpful – with expert knowledge of all the plans we can help you to access, we can confirm if a plan’s exactly right for you.