Equity Release

If you are aged over 55, equity release allows you to access some of the money that has accumulated in your property over the years without having to move home.

There are different options for releasing cash which are lifelong commitments. This means that as long as you maintain the terms of your contract or do not get taken into long term care you can remain in your home.

Although many people find them helpful they won’t be suitable for everyone. This article is just a guide to give you more information on equity release. We would advise anyone who is considering it to speak to a professional advisor before making any decisions.

Equity Release is a lifetime mortgage or home reversion scheme. To understand the features and risks, ask for a personalised illustration.

How equity release works

You have a choice:

  1. You can borrow money; this is secured against your property and is called a ‘lifetime mortgage’, or
  2. Sell all or just part of your property; this is called a home reversion scheme

Lifetime mortgage

You have a choice of borrowing a cash lump sum at the start, or a lower amount initially and the option of being able to take small amounts when needed. The benefit of taking a drawdown when needed is that you will only pay interest on the money you actually use. As the name states this loan is for lifetime so does not have to be repaid until you die.  When this happens the property is sold and the loan and interest is deducted from the proceeds of the sale.

Home reversion scheme

Under this scheme you are usually able to sell all or a percentage of your home to the provider. You have a choice of receiving a cash lump sum, an income each month or a combination of the two. Be aware however, the amount you receive will be a lot less than the share you sell. Under this scheme the reversion company will have legal ownership, or a share of the property’s ownership. A lifetime lease guarantee ensures they are not allowed to sell the home whilst you or your partner are still alive or have been placed in long term care.

Before making any hasty decisions you should:

Look at other options that may be available to you such as:

  • Unsecured personal loan-If you only need a small amount and repayments can be easily met through your pension this may be a cheaper option for you
  • Grants and benefits-If the money you want to release is for home improvements there may be local authority grants available to you. Grants and benefits for conversions for those with disability needs are available for those who qualify
  • Downsizing-If you live in a large property it may be worth considering downsizing. This will not only release funds from the sale and purchase of new home but will also be cheaper to run

For help and advice please speak to a professional advisor before making any decision