What is equity release?

Later in life, you may find that you need additional income. One solution people turn to is releasing money from the value of their home while continuing to live there.

This is called equity release. This is a very big decision. No decisions should be without professional advice. 

What is equity release? 

Equity is the total market value of your home minus any remaining mortgage. In short, it is the sum you would walk away with if you sold your property. If you don’t want to sell your home, you may be able to access a tax-free portion of its equity.

It can be taken as a lump sum or taken as regular instalments. There are two main types of equity release:

Lifetime mortgage

With a lifetime mortgage, you take a lump sum from the equity in the property. Which is eventually paid back by the sale of your home. You repay the mortgage when you move into long-term care or pass away.

You borrow between 18% and 50% of the property’s value. And you need to be over 55 years old to qualify for a lifetime mortgage.

Home reversion

You sell all or part of your property while continuing to live there. As well as the right to live in it. You can opt for a lump sum or a regular income with these schemes.

You need to be over the age of 65 for a home reversion. 

What are the benefits of equity release? 

The FCA regulates these as one of the safest ways to access equity tied up in your property. This allows you to get some equity safely. Otherwise, you would not have access to that.

There are several reasons why people use these schemes, such as paying off remaining mortgages or debts, making home improvements, helping family members, or going on holiday. Since you can stay in your own home, it is a great alternative to downsizing. 

As with many products, there are pros and cons. A mortgage secured against your property will have to be repaid.

After you die or go into long-term care, you may reduce the amount of inheritance you leave behind. 

Is equity release right for me?

It's a big decision. Whether it is right for you depends entirely on your circumstances. The best way to know if it is right for you is to seek advice.

We have a range of advisors who specialise in this area.