Equity release is a popular method of funding your retirement by releasing the cash (or equity) that is locked up in your home.

If you need to release money from your house to receive a lump sum or extra money over a period of time then you may want to consider an equity release plan. You can use the money as you wish.

To qualify for equity release, you must:

  • Be aged 55 to 95
  • Own a home worth £50,000
  • Be living in the UK

Am I eligible for equity release?

If you meet the criteria above, you are likely to be eligible for equity release. Make a FREE and quick equity release mortgage enquiry below to speak to an equity release specialist.

How does equity release work?

There are two main ways that equity can be released from your home.

  • Lifetime mortgage
  • Home reversion

When you release equity from your house, you can either receive the equity released in full, as a lump sum, or you can choose to have the money released to you in smaller regular payments.

It is advisable to speak to a solicitor or an independent adviser if you need help in picking a plan or an equity release provider.

What is a lifetime mortgage?

With a lifetime mortgage, you borrow money using the value of your home as security. As it is a loa, the money needs to be re-paid when the property is sold or when you die.

As it is a mortgage, interest payments will apply. The interest payments will apply in one of two ways:

  • Interest only mortgages- where the interest is paid each month
  • Rolled-up interest loans – where the interest is paid back when the house is sold or you die

What is a home reversion plan?

In a home reversion you can sell part, or all, of your home. If you sell part of your homen, this is called part reversion of your home. By reverting your homen, the company involved owns part (or all) of your home. You retain all rights to live in your homen, but the reversion company will be entitled to the arranged percentage of your home should you move house or when you die.

Why would I want to release equity from my house?

There are a number of reasons why you may wish to release equity from your house.

Some common reasons include:

  • Provide extra income for day to day living
  • Allow you to supplement your pension with extra cash
  • Re-pay debts
  • Buy a car
  • Home improvements
  • Fund medical procedures
  • Go on a holiday of a lifetime
  • Pay for care home funding

How much will equity release cost?

The cost can vary depending on the company arranging equity release on your behalf.

You may be given a single advice charge or may be charged a percentage of the value of the equity being released.

There may be more than one charge that applies. Before entering into the plan, find out which of the following charges apply and take these into account:

  • Equity release advice fees
  • Valuation charges – if your house needs to be valued first
  • Solicitor’s fees
  • Buildings insurance-whilst the plan is in place
  • Mortgage arrangement fee

Diabetes and preferential equity release rates

People with long term health conditions such as diabetes may be offered preferential rates. The preferential rates are based on the assumption that people with diabetes may die earlier than those without and therefore they carry less risk than those without a long term health condition.

People with diabetes often face higher charges for insurance but with equity release the risks are the other way round for a change.

What are the risks of a lifetime mortgage?

The risks of a lifetime mortgage can depend on the interest rate you pay on the mortgage. You can choose either a fixed or a variable mortgage rate.

If taking out a variable rate mortgage, some providers may allow the rate to be capped at a certain value so you are protected against high interest rates and therefore more costly interest charges.

It is possible that your home can lose value over the period of your lifetime mortgage plan, in which case you could face having negative equity. Some providers will offer protection against this happening.

What are the risks of home reversion?

Home reversion does not involve interest rates but you won’t expect to receive the full market value cost of the part of your house you are selling. This is because the reversion company takes on risk related to any decrease in value of your property over the duration of the plan (ie until you sell your property or you die).

The percentage of the market value you can expect to receive will usually depend upon your age, and that of your partner. The older you are, the better percentage you will likely receive.

Get our free newsletters

Stay up to date with the latest news, research and breakthroughs.

You May Also Like

Cost of Living Guide

With bills and the cost of food rising by unprecedented amounts, the…

Critical Illness Cover for Diabetes

Critical illness cover (CIC) is an insurance policy which provides financial protection…