The website for mortgage advice of all sorts

Rookery Farm
Mile Hill
Porthtowan
Truro TR4 8TY

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A further way of releasing some of the increased value of your home, as a mixture of a small lump sum with the rest of the capital producing income in order to improve your lifestyle, is through a Home Income Plan. These plans were normally restricted to a sum of £30000, with no more than 10% being taken as cash. The rest was used to purchase a lifetime annuity which was then used to meet the monthly mortgage interest payments with the Capital being repaid on death. Tax relief (MIRAS) was granted on the loan - hence the limit of £30000.

Entering into a Home Income Plan has long term implications for both you and your beneficiaries and you should not proceed lightly with any form of releasing cash from the equity in your home, without taking independent financial and legal professional advice. You should also consider the other alternatives, such as downsizing, sale and rent and other forms of equity release. If you fail to do so and make a mistake it will be difficult and expensive, if not  impossible, to rectify it and there are often better solutions available.

The links below will take you to a series of calculators where you can compare the options and may help you to decide whether or not the severe limitations of a home income plan are suitable for you.  Lenders will provide net income only through an annuity arranged by them and you might get a better annuity elsewhere by shopping around, using the lump sum method. This is something you should check carefully.

Equity Release.....The Options.....The Home Income Plan

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Advantages

Regular income for life, and the mortgage mortgage interest payment is deducted automatically.

The amount you owe is fixed and any increase in the value of your home belongs to you or your family.  

Disadvantages

Not suitable for those looking for a substantial lump sum.
Income is normally fixed at outset, so will be eroded by inflation.

Built-in annuities are not the most competitive - you are generally better off shopping around for an annuity (if the plan permits this) or investing the money elsewhere.

Since the tax relief under MIRAS was withdrawn in April 1999, home income plans are only suitable when annuity rates are high. Otherwise the annuity would be insufficient to meet the mortgage payments. Today, this is only likely to be the case for people in their late 80s or older.

Once done, can't be undone.

Very few, if any, lenders would be interested today in setting up such an arrangement. The combination of the loss of MIRAS, the fall in annuity rates (which tend to follow interest rates fairly closely) and the consequent negligible net income that a home income plan could provide for most people is such that it would be an unprofitable and unproductive exercise from their point of view. Indeed, it would only work, possibly, for very elderly applicants, who would almost certainly be better off examining one of the other equity release alternatives. You will find some of today's products called 'Home Plans', but these are pure interest only mortgages for older people, without the income facility, and should not be confused with Home Income Plans.

The Mortgage Shop is a retired IFA that no longer gives direct advice on or arranges Equity Release. Instead, it passes your enquiry to a fully qualified and licensed professional firm, in your local area, that
will do this for you. This is a FREE referral service to you, without any obligation, and you are completely at liberty to negotiate with the firm concerned the terms for their advice and services. The information provided is on the basis of our understanding of UK tax law and Inland Revenue practice and is subject to change.  This site is intended for persons aged 18 or over, resident or ordinarily resident, in the United Kingdom. email: bobstark@mortgagefor.me.uk

This is about Equity Release Plans. To understand the features and risks, ask for a personalised illustration. The actual APR rate available will depend upon your circumstances.

I recently succesfully challenged a DWP statement that a married couple were not entitled to  Pension Credits. As a result, their income was increased by almost £175 per month

The Mortgage Shop will be pleased to discuss your objectives and to put you in touch with an approved local specialist firm that arranges equity release.