There are a number of companies offering equity release plans for property, but these are restricted to the main homes where people live. An income or lump sum is paid to the homeowners in return for a share of the house. After the homeowner dies, the home is sold and the financial company receives money from their share of the property.
Landlords have faced higher costs due to increased stamp duty and reductions to the tax relief on commercial mortgage interest payments. Many people have invested in buy to let property to provide a retirement income but have seen their income reduced because of the new tax changes. Now several firms are offering schemes for landlords that can increase their retirement income.
Finance is available in the form of a loan secured by property or a number of properties, without the finance company owning a share in the property. Interest is charged at just over 6%. Borrowers can choose to pay the interest on a regular basis or pay the full loan plus interest at the end of the loan period. If the homeowner dies and the property is sold to pay off the loan, tenants are protected and will not be evicted.
These new equity release schemes provide landlords with more options to use buy to let properties to help fund a retirement income.