Equity release explained

If you're over 55 and thinking about releasing equity from your home, our informative and straightforward guides are designed to help you understand how it works and what you need to consider, including:

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Understanding equity release
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What is equity release?

Equity release is a way you can access the money tied up in your home without having to move. The cash is tax-free, yours to use how you choose and can be paid in a lump sum or instalments.

How does equity release work?

There are two types of equity release to choose from: the more popular lifetime mortgage and the home reversion plan.

The amount of equity you can release will depend on your own personal circumstances including your age and the value of your property.

A lifetime mortgage is designed to last for life. You're not required to make any monthly repayments unless you choose to, still have the freedom to move home and you can release equity if you have an existing mortgage on your property. You just need to repay the outstanding debt with the money you release.

This type of mortgage will impact the value of your estate and could affect any benefits your currently receive, so it’s not the right choice for everyone. Before going ahead you should seek professional advice from a qualified financial adviser who will explain the pros and cons and discuss the alternatives with you.

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What can the money you release be used for?

The money you release from your property can be used however you wish. Find out how other people have used their cash sum.

More on how the money can be used

How much does equity release cost?

The cost of equity release includes fees for setting up the loan and, in the case of a lifetime mortgage, the interest that accumulates over time.

More on how much equity release costs

Is equity release a good idea?

Equity release may be worth considering but it's important to weigh up the benefits and risks before making a decision.

More on whether it's right for you

How does equity release work? - Video

Watch our one minute video explaining how equity release works

Eligibility for equity release depends on several factors, including your age and the value of your property, but ultimately the exact requirements to qualify will be dictated by each provider's lending criteria.

Typically to qualify for a lifetime mortgage you will need to meet the following criteria:

  • You or the youngest home owner must be at least 55 years of age
  • Your property must be your main residence and located in the UK or Northern Ireland
  • The value of your property should be at least £70,000
  • The property must be habitable and in a good state of repair

Eligibility for a home reversion plan is similar except the minimum age is 65 years of age.

To understand more, read our guide on what can affect your eligibility for equity release.

Where to get advice on equity release 

Equity release is regulated by the Financial Conduct Authority (FCA) as an ‘advised product’. This means that all companies offering equity release must provide advice either via the lender themselves, an Independent Financial Adviser (IFA) or an equity release broker.

Anyone offering advice on equity release must be qualified to do so. By choosing a specialist adviser who is a member of the Equity Release Council (ERC), you will be taken through a structured financial advisory process, which should answer any questions you have and include a review of your personal circumstances. It should also explain the benefits and risks as well as any alternative forms of funding available to you. As Martin Lewis always says about equity release, it’s important to consider all of your options before making any decisions.

Be aware that some advisers will only be able to advise you on the products they offer. Whereas a suitably qualified IFA or specialist mortgage broker will be able to compare equity release plans from a range of providers, not just individual companies, giving you a much broader view of what's available and what products may be best suited to you.

It’s also important to choose a lender who's a member of the Equity Release Council to ensure you're protected by their safeguards and rules. So, avoid equity release companies who don’t have their seal of approval.

To help you understand more about equity release and answer any questions you may have, we work in association with Age Partnership. They offer free initial advice with no obligation and have agreed exclusive plans with leading lenders you may not be able to get elsewhere. Alternatively you can find details of other specialist brokers, IFAs and providers on the Equity Release Council’s website.

If you have any questions and or would like advice, please call us on 0800 133 7656 or request a call back – you're under no obligation to go further and there's no cost to you for this advice*.

 

Ashley Shepherd - Author's Profile Picture
More information on equity release from our expert Ashley Shepherd
 

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