What is equity release?

Want to know more about releasing equity from your home? We'll explain the benefits, drawbacks, and costs of equity release to help you make an informed decision.

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What is equity release and how does it work?

Equity release is a way for homeowners aged 55 and over to access some of the tax-free funds from their home.

You could release some of the tax-free funds from your home in one of these three ways through an equity release plan.

  • Lump sum lifetime mortgage: This is a loan secured against your home, giving you access to a one-off release of money while still living in and retaining ownership of your property.

  • Drawdown lifetime mortgage: The same as a lump sum lifetime mortgage but instead of taking just one lump sum, you agree an overall sum of money and after an inital release. You can then request further release amounts in stages as and when needed. Interest is only payable on the amount of money that you've released.

  • Home reversion: This involves you selling part or all of your property to a provider, in exchange for a tax-free lump sum of money. You can then continue living in your home rent free but you will no longer be the legal owner.


Who is eligible for equity release?

To qualify for equity release, you must meet a lender’s eligibility criteria. These are usually:

  • You’re aged 55 or over

  • You’re a homeowner and own property in the UK

  • Your property is worth a minimum of £70,000

  • You release a minimum amount of £10,000, subject to criteria

To give you a better understanding of each factor, let’s look at them in more detail.

Your age

It’s important to remember that it’s the youngest homeowner that must be aged 55 or over to qualify. The age of the youngest applicant is always the basis of the equity release enquiry. 

Your home’s location

Another factor will be the location of your home, as it must be located in the UK for you to qualify for equity release. There are only a handful of lenders who will consider lending to you if your property is in Northern Ireland. Check with your equity release adviser to understand if the location of your home would be acceptable.

The value of your home

The minimum property value any lender will accept is £70,000. Some lenders do also have a maximum value to protect themselves from risk. The condition of your home is also something providers will take into consideration. It will need to be in a good condition and maintained to a high standard. 

How much money you could borrow

The maximum amount of money you can borrow is based on the youngest homeowner, property value and in some cases your health and lifestyle choices. The older you or your partner are, the more money you could potentially borrow. Our advisers will recommend an appropriate loan amount that meets your current and future financial needs.

Want to know how much equity you could release? Use our free equity release calculator.

Remember, you’ll need to pay off your existing mortgage before you can proceed with equity release. If you need to do this, you can use the funds you release to pay off your existing mortgage, and the rest of the money will then come to you. 

How long does equity release take?

Depending on the type of equity release plan you have chosen, it typically takes between 10 and 12 weeks to receive the funds into your bank account*. If there are any complications along the way, it could take longer. However, your adviser will be on hand to talk you through the whole process.

* Timescales cannot be guaranteed however this is a typical time frame.

Can you pay off equity release early?

Equity release isn't designed to be repaid early and we do not recommend equity release as a short term lending option. However, you can repay your equity release plan early if you want to. Dependant upon the lender, the type of plan and when it started, early repayment charges may apply, so check with your lender before making a payment. If you plan on making early repayments we would not recommend equity release as a short term lending option. 

Some plans offer fixed early repayment charges, so you know your early repayment charge from the outset. Other plans offer gilt based early repayment charges meaning your early repayment charge will vary throughout the lifetime of your plan. This is because plans are usually repaid when you or the last remaining borrower either passes away or moves into long term residential care. It’s important to discuss these options with your adviser when setting up your equity release plan.

Lifetime mortgage benefits

Your specialist equity release adviser will explain:

  • You can unlock cash from your home, tax-free, to help meet your needs in later life
  • You’ll always retain full ownership of your home and can stay in it for as long as you wish
  • You can choose to make reduced or no monthly repayments to suit your circumstances
  • You’ll never owe more than your home’s worth
  • You may be able to remortgage your plan in the future to release further funds or secure a better interest rate, although this isn’t guaranteed and may be subject to early repayment charges

Potential drawbacks

Your equity release adviser will also outline the following important things to think about:

  • A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly
  • Equity release will reduce your financial options in the future
  • Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
  • Equity release may leave you with limited or no property equity remaining
  • A lifetime mortgage is a long-term financial product and is not designed to be fully repaid until the death or entry into long-term care of the last remaining borrower, otherwise early repayment charges may apply

Your other options

Before deciding on equity release, it's important you're aware of some of your other later life finance options, which may include:

Retirement interest-only mortgage
Retirement repayment mortgage
Or see if equity release is right for you

Equity release costs

Knowing the costs associated with equity release and how to help manage them is important.

Compound interest explained
Lump sum vs drawdown lifetime mortgage

Want to know more about equity release?

Our friendly and experienced team can be reached on 0800 188 4812 or via our quick contact form if you need any additional information.

Things to consider with equity release

  • If you are considering unlocking cash from your home, we recommend that you make sure equity release is right for you

  • The loan, plus compound interest, is typically repaid through the sale of the property when the last remaining applicant passes away or moves into long-term care

  • Unless you decide to go ahead with a plan, our service is completely free of charge, as our fixed equity release advice fee of £1,799 is only payable on completion of a plan