What does Equity Release mean?

Equity Release is a way to unlock tax-free cash from your home once you reach 55.

Many people choose to release equity from their home as part of their plans for retirement. The money released can help fund the lifestyle they want once they start working less, or stop working altogether.

Read on or call our experts at Age Partnership on 0800 056 1606 to find out more (call charges will vary).

Equity Release may involve a Lifetime Mortgage which is secured against your property or a Home Reversion Plan. To understand the features and risks, ask for your personalised illustration. Equity Release requires paying off any existing mortgage. Any money released, plus accrued interest would be repaid upon death, or moving into long-term care.

Different types of Equity Release

There are different types of Equity Release plan out there. Here’s a quick breakdown of how each of them works:

Lifetime Mortgage

This is the most popular option, where you get a tax-free lump sum loan from your home. You continue to own your home, but interest is added on to the loan. You can choose to pay this off with voluntary repayments, if you choose. Outstanding interest will need to be repaid after your death or if you go into long term care. There are also options to make voluntary repayments, if you choose.

Drawdown Lifetime Mortgage

Just like the Lifetime Mortgage, you’ll continue to own your home after you release money from it. Again, interest will be added to it and will need to be repaid. You can choose to make voluntary repayments to clear the interest. However, here you have a little more flexibility. You can release money over time as and when you need it, instead of in one big lump sum. You will only pay interest on the amount you release, so this could be more cost-efficient.

Interest Only Lifetime Mortgage

This type of plan is just like a normal Lifetime Mortgage, where you get a tax-free lump sum and continue to own your home. However, with an Interest Only Lifetime Mortgage you can choose to make repayments to the plan. This will help reduce the effect of the interest on the value of your property.

Home Reversion Plan

This type of plan is different from a Lifetime Mortgage as you give up the ownership of some or all of your property for a tax-free lump sum. You also have to be age 65 or over to take out this kind of plan. You still get to stay in your property, and you don’t have to pay any rent to the lender.

Want to know more?

We have a full guide that goes into more detail about how each type of Equity Release plan works. It should help you make an informed decision about what’s right for you.

Equity Release options

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Is Equity Release right for me?

Equity Release isn’t for everyone. It’s important to think about the pros and cons, so you can make a decision that’s right for you.

Here’s a breakdown of the type of things to think about:

Pros

  • You get a lump sum of tax-free cash.

  • Once you’ve paid off your standard mortgage with your lump sum, you can spend the leftover cash on whatever you want.

  • You can keep living in your home after releasing money from it.

  • You don’t have to make monthly payments on any Lifetime Mortgage plan. It gets repaid when you die or if you move into long-term care.

  • With any Lifetime Mortgage plan you still own 100% of your home.

Cons

  • Any cash you release from your home could affect any means-tested benefits you’re entitled to.

  • When you die or go into long term care, the money you released from your home is paid back from your estate, along with any interest. This means the amount of money you leave to your loved ones would go down.

  • If you go for a Home Reversion Plan then sell part or all of your home, you won’t benefit if the value of your home goes up.

  • An Equity Release plan is a lifetime commitment. If you want to pay the loan back early or buy back your home you will need to pay extra charges.

Feeling unsure?

To see how much money you could unlock form your property, try our Equity Release calculator. It’s quick, easy and can give you a result in seconds.

What you can do next

If you’d like to know more about Equity Release or start the process, here are some steps you can take:

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Important information

If you decide to release money from your home, the money you get would be a loan. It gets paid back after you die along with any interest, meaning the amount you have to pass on as inheritance could go down. Any means-tested benefits may also be affected.

You will speak to an adviser before releasing any money and they’ll make sure you understand the whole process.

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