Ten things to know about managing your home in retirement ¦ Property Guides on Times Online

- Equity release is a complex subject. Not only do you need to decide whether it is a good idea given your specific circumstances, but you also need to decide which type of scheme to go for and whether you wish to take a single advance or a draw down several payments. Should you opt for a portable scheme? Do you wish to leave a portion of your home to your dependents? Before you make any decisions, it is essential to take advice. Find a financial adviser who specialises in the subject: IFA Promotion’s website can help you search for an equity release IFA in your area.

- You need to decide on which type of equity release you wish to take. The most popular type of scheme is a lifetime mortgage, also known ass a roll-up mortgage. With a lifetime mortgage, you are permitted to borrow up to 50 per cent of your property’s value. Interest on the loan is rolled up and repaid – either by you or by your estate - once the house has been sold. The percentage of your home’s value you are permitted to borrow varies with age: at 55 you would be able to borrow around 20 per cent of the property’s value; at age 90 you could borrow the full 50 per cent.

- Interest rates on lifetime mortgages vary according to how much of the property’s value you intend to borrow: rates vary considerably, so it is worth shopping around. Note that because interest is “rolled up” it is added on to the amount that you have borrowed: as a result, you (or your estate) will end up paying interest on the interest.

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- If you took out a lifetime mortgage several years ago, you might want to consider remortgaging as rates have fallen significantly over the past few years. In 2001, rates ranged from 7.99 to 8.5 per cent; they are now around 6.5 to 7 per cent.

- The second type of scheme is a home reversion plan and is usually only available to those aged 65 or over. With a home reversion plan, you sell part of all of your home to the equity release provider at a sub-market rate. How much you get depends on your age and state of health: the older you are, them more money you will get for your home.

- When you sell a portion of your home, the title of that portion is transferred to the home reversion company; the rest is held in trust. When you die, the portion you have not sold forms part of your estate.

- Some equity release plans are portable, which means that you can switch them from one property to another if you choose to move.

Costs: equity release

Lifetime mortgages

Valuation costs: From £200 to £800, depending on the value of your property

Application fee: Fees range significantly from zero to over £1,000.

Legal fees and searches:Around £250

Redemption charges: As with a normal mortgage, they may be early redemption penalties if you repay a lifetime mortgage early.

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