Equity Release

What is equity release

Equity release is a form of borrowing which allows homeowners usually over the age of 55 as a minimum, to release the equity from their home as either a tax free lump or as an income. It is also possible to take several smaller lump sums over several years.  

Most policies do not repay the interest or capital of the borrowed amount until some qualifying events, which is often for your lifetime or until you enter care.  

As there are typically no repayments of either the capital or interest, this means the debt can increase quickly.  

It is worth pointing out that for products that meet the Equity Release Council’s standards, they are required to feature a ‘no negative equity guarantee’, which means the debt you must repay will never exceed the value of your home.  

What can Equity Release be used for?

Their s no prescribed use for the proceeds of equity release and it is often used for the following reasons:

  • Fund your retirement and try and address any shortfalls in your standard of living.  
  • Home improvements.  
  • Fund luxury one off items such as travelling the world or replacing a kitchen.
  • Help your children get on the property ladder or gifts in general.
  • Necessary home improvements, particularly if you do not wish to downsize or go into care.  

Isn’t Equity Release ‘bad’?

Equity Release historically had a bad reputation as borrowers were not awarded the protection they are afforded by the Equity Release Council (ERC).  

As the capital and/or interest is not typically repaid from the amount you borrow, the debt can increase.

Prior to the ERC and the ‘no negative equity guarantee’, it was possible for the initial equity that was released increase over the value of the home.     

Who is Equity Release suitable for?

Equity Release can be suitable for the following people:

  • Those who own their home that is usually mortgage free.
  • Applicants who meet the minimum age requirement of age 55 or above.

Equity Release can often be suitable for those who wish to unlock equity in their home for a specific purpose, but have no way of funding it such as savings, pension income and do not wish to sell the property.  

Is Equity Release right for you?

Alex and George both have the specialist qualifications in Equity Release and can work with you to answer if it is right for you.  

We will always put your best interests first, which may even mean recommending doing nothing.  

If equity release is right for you, this can be a complicated decision. If you are interested in equity release, contact one of our independent equity release advisers.  

Frequently Asked Questions

Lifetime Mortgages

This involves taking out a mortgage on your property, yet you still retain ownership of your property.

You can either ‘protect’ some of the value of the property or none at all. You also have the option to make repayments to either the capital or the interest, or let the interest ‘roll up’.

The accrued interest and initial loan amount is repaid when you die or if you move into long term care.

Home Reversion

With home reversion, you sell either all or a percentage of your home in return for either a lump sum, regular income or a combination of the two.

You usually get between 30%-60% of the current market value of the property and the older you are, the higher the percentage of the current market value you will receive.

You reserve the right to continue to live in the property under a lifetime lease.