Home Income Plan
How does it work?
With a home income plan, equity is released through a lifetime mortgage or a home reversion plan and is automatically invested into an annuity that is built into the plan, to generate an income for life. A cash lump sum may be available in addition to an income, but the amount may be restricted.
An annuity is a plan that guarantees a series of payments in exchange for a cash lump sum. The income you receive will depend on prevailing annuity rates, your age at the outset and your gender.
The advantages and disadvantages of a home income plan largely depend on whether the money is released through a lifetime mortgage or a reversion plan, however annuities have their own set of pros and cons:
- A lifetime annuity guarantees that the income will be paid for as long as you live.
- Income can usually be taken on a level or increasing amount each year.
- With a home income plan annuity, you can usually get a higher income than would be payable from a standalone annuity.
- You may be able to take some lump sum in addition to the annuity.
- The older you are the higher the income.
- As interest is repaid automatically, the reduction in the home’s value is minimised.
- You are committed to an annuity as a means of extra income, leaving you no choice of alternatives.
- You can lose out by taking a lifetime income if you were to die soon after the plan is completed unless the plan includes protection against this.
- You do not have the option of allowing the interest to build up, so the reduced annuity may not improve your financial circumstances greatly.
- Home income plans involve borrowing against your home and may work out more expensive in the long term than downsizing to a smaller property.
- Home income plans may affect your entitlement to state benefits and grants.
Home Income Plans can be arranged by Blestium Financial Services, which is a trading name of Martin Newell who is an appointed representative of The Openwork Partnership which is authorised and regulated by the Financial Conduct Authority.