Equity release

Is equity release right for you?

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If you’re over 55 you might be thinking about how you are going to fund your retirement.

A detached house

Indeed, you might already be retired and wondering if there’s any way you could improve your financial situation. If you own your home, one option might be an equity release plan. These plans release capital tied up in your home to supplement your finances.

Plans are regulated by the government’s Financial Conduct Authority, which means advisers and product providers are obliged to adhere to published standards in terms of their knowledge and the way they run their businesses.

Guide to equity release

Equity release allows you to release cash from your property without the upheaval or expense of moving home. To be eligible for one of these plans, you need to be a UK homeowner aged 55-95. The money you release can be spent in any way you like and, what's more, there are typically no monthly repayments to make. And there’s no need to worry about the longer term: you can stay in your home for life, or until you decide you want (or need) to move.

What types of equity release plans are available?

There are many equity release plans on the market, so it’s vitally important to seek independent, expert advice from a company that will compare the whole market to find the right deal for your circumstances.

There are two main types of equity release plan:

With a lifetime mortgage, you take out a loan, secured on your property, and receive that amount as a tax-free lump sum. You do not usually make monthly repayments. Instead, the interest “rolls up”, and the loan plus interest is repaid after your death, when the property is sold.

With a home reversion plan, you sell all or part of your home in return for a tax-free lump sum and a guaranteed lifetime lease, with no monthly repayments to meet. After your death the house is sold, so the lender gets back its percentage share.

Save money with a drawdown plan

If you are considering releasing the cash out of your home, you might want to consider taking out a plan with a drawdown facility. This flexible type of equity release plan allows you to “draw down” the funds over a period of time, as and when you need it.

This approach can reduce the amount of money owed when the plan comes to an end, as you only start to accrue interest on the money as and when you actually withdraw it.

What else should I know?

Thousands of homeowners have already unlocked the cash tied up in their homes to give themselves a much-needed cash boost. However, it’s important to remember that taking our any kind of equity release plan will reduce the value of your estate. It might also affect your entitlement to state benefits.

Is there anything else to consider?

Many equity release providers are members of the Equity Release Council, which has a Code of Conduct to help ensure your financial safety. If you’re considering taking out an equity release plan it’s worth seeking out plans approved by the ERC.

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