Equity release is a way to take some of the tax-free cash out of your home without having to leave your property.
It’s available to homeowners aged 55 and over, and those whose property is worth more than £70,000.
You don’t have to make any monthly repayments if you choose not to, and equity release plans have no set term. The plan is repaid usually when you, or the last remaining borrower, either passes away or goes into long-term residential care.
What can equity release be used for?
Equity release has become a popular way to boost finances in later life as the tax-free cash you release can, typically, be spent in a wide variety of ways.
For some, it’s a simple matter of using the money to clear existing debts or help out loved ones. Others use it to fund the things they’ve always wanted and now have the time to do – holidays of a lifetime or home improvements.
You should always think carefully before securing a loan against your home.
How does it work?
There are two types of equity release – lifetime mortgages and home reversion.
A lifetime mortgage, the most popular type of equity release, is a loan secured against your home. It allows homeowners aged 55 and over to access some of the cash locked in the value of their property, while still retaining full ownership.
There’s usually a fixed rate of interest on these loans, though variable rates are available. There are typically no monthly repayments, unless you choose a plan where you can pay some, or all, of the interest each month.
By speaking to one of our independent Equity Release Experts advisers, they can recommend a plan to suit your circumstances. That could be taking the money in one lump sum or in smaller amounts after an initial withdrawal, protecting your inheritance, or making ad hoc capital repayments to reduce the overall cost of your plan.
A home reversion plan is the other type of equity release, however you need to be at least 65 or over to apply. A home reversion involves you selling part or all of your property to a reversion company in return for a tax-free lump sum. You will receive less than the market value of your home and the amount you will receive will depend on your age, property value and the proportion you sell. You can live in your home rent free for as long as you choose - however you will no longer be the legal owner.
There are no monthly repayments to make and no interest to pay. When your home is sold at the end of the plan, the provider will take their share of the proceeds; the remainder is left to your estate, providing you did not sell 100% of your property.
With a home reversion plan, you’ll receive your money in one lump sum.
Speak to one of our expert equity release advisers to find out which type of plan suits you best.
How much does it cost?
When you set up your plan, there may be some initial charges. These may include surveyors' fees. If you decide to go ahead with equity release, you will also be charged an advice fee and have solictors' fees to pay, but your initial consultation with The Equity Release Experts is completely free of charge.
Your adviser will explain these in more detail before you decide to proceed.
Is equity release safe?
Equity release is regulated by the Financial Conduct Authority (FCA). This is the UK’s financial regulatory body whose aim is to ensure protection for consumers, enhance market integrity and promote effective competition.
In addition, the Equity Release Council (ERC), an industry body for the UK equity release sector, provides extra safeguards. Plans approved by them ensure:
A no negative equity guarantee – you can never owe more than the value of your property
The right to remain in your property for life or until you move into long-term care
The right to move home (subject to provider criteria)
All members of the ERC must adhere to the Council’s Statement of Principles, designed to promote high standards of conduct and practice.
What are the advantages and disadvantages?
Equity release isn’t a one-size-fits-all solution. To fully understand whether it’s right for you, it’s important you speak to a qualified equity release adviser.
Our independent equity release advisers can review your circumstances and discuss any potential alternatives. After researching the whole market, your adviser will give you a personalised recommendation. If equity release isn't right for you, they'll tell you.
Advantages of equity release
You can release a one-off tax-free lump sum or, following an initial withdrawal, you can release more cash in stages
You can use the funds to pay off any existing mortgage or debts, therefore reducing your monthly outgoings
You don’t have to make any monthly payments if you don’t want to, however with some plans you have this option
You can continue to live in your home for the rest of your life
You’ll never owe more than the value of your home with an ERC-approved plan
Disadvantages of equity release
Equity release will reduce the value of your estate
It could affect your entitlement to means-tested benefits now or in the future
With a lifetime mortgage, the amount to be repaid can grow quickly because of the effect of compound interest
Equity release is designed to last for the rest of your life, so if you decide to pay it off early, you could have to pay an early repayment charge
How much can I release?
How much you can release depends on several things: Your age, health and lifestyle, and your property’s value.
The results provided will show you the plans you may be eligible for from across the whole market, the amount you could release with different providers, their current interest rate, and any benefits that come with the plan.
Although you can take out equity release if you still have a mortgage or any outstanding secured loans on the property, you must repay them, and the cash you release can be used to do this, any money left over belongs to you.
What happens next?
Releasing cash from your home doesn’t have to be complicated.
Step 1: See how much equity you could release
Get a free, no obligation quote using our equity release calculator to see how much cash you could release from your home. It compares the whole market to find an equity release plan that could suit you.
Step 2: Advice and recommendation
You need to book an initial consultation with your local, independent equity release expert at a time that suits you. Following this, should you decide to proceed, your adviser will look at all the products available on the market and book a second consultation with you to provide you with a personalised product recommendation and suitability report based on your circumstances.
Step 3: Application
Once you’re satisfied the plan suits all your needs, your adviser will complete an application form and deal with all the supporting documentation needed. Your home will then undergo an independent, professional valuation at a time suitable to you. An offer based on this valuation will then be given to you by the plan provider.
Step 4: Completion
Once you accept the offer, legal paperwork is coordinated by your solicitor and it should take approximately 8 to 12 weeks from application to completion. You’re then free to enjoy your tax-free cash.
Ready to take the next step or need more information? Call The Equity Release Experts to arrange a free, no-obligation initial appointment on 0800 408 7187 (lines open 9am-8pm Monday-Thursday, 9am-5.30pm Friday and 9am-5pm Saturday). Alternatively, download our free equity release guide.
Is equity release right for you?
Helping you understand equity release and finding out whether it is right for you is our primary role. Both you and your expert equity release adviser must be sure it is before going ahead.
A local, expert adviser can visit you at home to discuss your needs and explain more about equity release. They’ll always tell you if equity release isn’t right for you and there’s absolutely no obligation to go ahead. If you do decide to go ahead, our usual advice fee of 1.99% of the amount released, subject to a minimum of £1,499, is only payable upon completion.
We understand equity release isn’t for everyone, and we’ll never say it’s the right option for you unless we’re certain.
A lifetime mortgage is a loan secured against your property and the loan plus roll-up interest is repaid when your plan comes to an end. Usually, that’s when you, or the last-remaining applicant, either passes away or moves into long-term care. With a lifetime mortgage you’ll still retain full ownership of your home and there are typically no monthly repayments. You should always think carefully before securing a loan against your home.
Equity release reduces the value of your estate, may also affect any means-tested benefits that you're eligible for, and may affect your tax position.