What is equity release?
Equity is the difference in value between how much your home is worth and any mortgage or other debts secured against it.
Equity release is a way of turning some of this value in your home into tax-free cash. It could be a great option if you don’t want to downsize or move home, but need some extra money to help make your life easier.
Many people are using the equity in their homes to supplement their retirement income needs.
What can equity release be used for?
You can use the money you release to pay for almost anything you like. Whether that’s managing everyday costs, helping out family members, paying off an interest-only mortgage, buying a new car or funding a holiday.
There are various ways to release equity from your home. A lifetime mortgage is a loan secured against your home and is one of the most popular. With a lifetime mortgage:
• You’ll receive a tax-free cash lump sum
• You’ll continue to own your home and can stay in it for the rest of your life.
• You can move your lifetime mortgage to another suitable property
• You don’t have to repay the lifetime mortgage until the property is sold, which is usually on either on your death or move into long-term care (or of the last borrower, for joint arrangements)
• If you can afford to do it, you can choose a lifetime mortgage that allows you to pay some or all of the monthly interest to help reduce the overall cost of the loan.
It’s worth bearing in mind that you’ll continue to be responsible for the upkeep of your house, and that taking equity out of your home will reduce the value of your estate, or the inheritance that you leave to your beneficiaries. Also, any money that is gifted to family could be subject to inheritance tax. If you’re using equity release to repay an existing mortgage, this may cost more in the long-term.
Our equity release advice service
As a business we’ve helped over 80,000 people decide if equity release is right for them and to date, we've enabled our customers to release over £1 billion of equity from their homes.
We can help you decide if equity release is right for you, and if it isn’t right for you, we’ll tell you.
Our advice comes with a no obligation guarantee - meaning that our advice and arrangement fee of £1,100 is only payable if you decide to take out a recommended plan.
All of our advice and support can be offered face-to-face or over the phone.
Find out more about our equity release advice service.
Find out more about the different types of equity release +
There are two main types of equity release plan: lifetime mortgages and home reversion plans.
A lifetime mortgage is a type of loan, secured against your home, which allows you to release a cash lump sum (or, with some plans, take smaller amounts as and when you need them) from the value of your property.
You may qualify for an enhanced lifetime mortgage - a form of equity release that could allow more cash to be released from your property than a standard lifetime mortgage, depending on lifestyle and medical factors that are taken into consideration.
You could qualify if you have one or more of these health or lifestyle issues:
- high blood pressure
- diabetes requiring tablets/insulin
- a medical condition such as angina, heart attack, cancer, multiple sclerosis or Parkinson's disease
- retirement due to ill health.
|You continue to own your home and will benefit from any house price rises.||This is a lifetime commitment, but there may be an early repayment charge if you decided to repay your mortgage early.|
|You are able to stay there for the rest of your life or until you move into long-term care.||
The interest accumulated on the loan can be significant and will reduce the value of your estate.
|There are normally no regular payments to make and nothing has to be paid back until the end of the plan. This usually happens when the last plan holder living in the property moves into long-term care or dies.||
Taking out a lifetime mortgage could affect the amount of means tested benefits you receive.
|If you qualify for an enhanced lifetime mortgage you could release more money from your home.||Charges for equity release advice, valuation fees and solicitors fees may apply, as well as admin fees.|
|Most plans feature a 'no negative equity' guarantee which means you will never owe more than the value of your home when it's sold following death or moving into long-term care.|
|You can choose to take the money you release as either a lump sum, as regular payments or on an ad hoc basis when you need it.|
|Interest is only charged from the day you take the funds.|
|You can take as little as £10,000 initially and could have access to further smaller amounts as and when required.|
Home reversion plans involve selling part or all of your home to a home reversion provider in return for a cash lump sum, which is usually higher than the sum you can raise from a lifetime mortgage.
When you die or move into long-term care, the property will be sold and the reversion company receives its share of the proceeds.
|Whilst all or part of your home will belong to someone else, you can remain living there for the rest of your life rent-free, or for a nominal amount.||You're responsible for the maintenance of your home.|
|A home reversion plan is not a loan and so there’s no interest to pay.||You will not benefit from any increase in property value for the share that is owned by the home reversion company|
|If your property increases in value, you will still benefit from the increase in value of the proportion you still own.||You will receive significantly less than the current market value for the share of the property you sell. This is because the reversion company who buys your home cannot sell it until you die or move into long-term care and so need to protect themselves against any potential loss in value.|
|You won't suffer from any decrease in property value for the share of your home that is owned by the home reversion company.||A home reversion plan is a lifelong commitment and if you decide to buy back your share of your home you will need to do so at the current market value.|
|You have no repayments to make as the home reversion provider receives their share of the value of the property value when it is sold upon death or moving into long-term care.||It will reduce the remaining equity you have by the share of your property that you sold and you won't benefit from any increase in property value for the share that is owned by the home reversion company.|
|You know from the outset the share of your home you retain for your estate.||If you die shortly after taking out the plan, you will have effectively sold a share of your home very cheaply (some providers do offer protection against this with an early death clause).|
|Charges for equity release advice, valuation fees and solicitors fees may apply, as well as admin fees.|
|Taking out a home reversion plan could affect the amount of means tested benefits you receive.|