Most people who have owned their own homes for a long time and who may even have paid off their mortgage completely, still find themselves with difficulties making ends meet. So what do you do if you don’t want to sell your home and downsize or take out a new mortgage with the associated monthly repayments?

For anyone over the age of 62 and who has equity in their primary home, there is a possibility to release that equity and make your self more financially comfortable without having to take on new monthly payments or move house. The amount available is normally calculated as a lump sum of money you can borrow against your home but you do not have to take the loan as a lump sum, there are other options.

You will still own your home and you can, if you choose to, live in it until you die or decide it is too much for you to cope with. This option is called a ‘Reverse Mortgage’ and they are available either through ‘public sector’ financing (with certain restrictions) or the ‘private sector’ providing you are eligible under the terms of the scheme.

How a reverse mortgage works is that you take out a loan against your home but you do not make any repayments, instead any interest accrued is added to the loan amount year on year and is paid off either when you die, you sell the house or you leave the house and it is no longer your primary residence.

Obviously there is a downside to these types of mortgage and the main one is that you reduce the amount that you can leave as part of your estate to your children or other heirs. The worst case scenario is that by the time you move on that the entire value of your house is owed against the mortgage, more typically though you can arrange things such that you are still able to leave something but have released some funds to make your life a little easier.

Most families I would think would be more than happy with this arrangement and even if they are not, at the end of the day it is your money and your life times work that got you your home in the first place.

The basic calculation you need to make is best done using a calculator into which you enter your home value, any outstanding loan amount, your zip code and the youngest home owner’s age (don’t forget the requirement is a minimum 62 years old).

The calculator will work out the lump sum available which, as stated earlier, can be taken in different ways, either as a lump sum calculated as a regular monthly payment in cash or demand basis.