Types of equity release

What is a lifetime mortgage?

A lifetime mortgage – the most popular type of equity release – is a loan secured against your home. It allows you to retain full ownership of your property and can provide flexibility through features such as inheritance protection or partial capital repayments.

You can check out more features on our lifetime mortgage page.

There are typically two ways in which you can receive your cash with a lifetime mortgage. You can choose either one lump sum or smaller amounts after an initial withdrawal.
 

What is a home reversion plan?  

Alternatively, home reversion plans allow you to sell all or part of your home to the plan provider in return for a cash lump sum, with ownership of the property passing to the reversion company.

You are able to remain in the property for as long as you wish, and unlike with a lifetime mortgage, there is no interest charged on a home reversion plan. However, you will not receive the full market value of your property.
Depending on how much you choose to sell will also dictate what you can leave as part of your estate.

If you decide to sell 100% of your property to the reversion company, your estate will not benefit from any increase in your home’s value when you pass away. If you don’t, the percentage leftover will.
 

Some of the most significant differences to be aware of:

 
   LIFETIME MORTGAGES        HOME REVERSION
Own your own home? Yes No
Option to pay monthly interest? Yes No
Accrue interest? Yes No
Sell a share of the property? No Yes
 
So which option is right for you? That decision comes down to several factors, including but not limited to:
  • The amount of money you’d like to release
  • How much your home is worth
  • When you will need the cash, and whether it will be needed all at once or in instalments
  • How old you are
  • Whether you would like to ensure that some money is reserved as an inheritance
  • Your general health and lifestyle

The importance of your decision means that talking to an expert equity release adviser is essential. They will walk you through all your options before identifying the most suitable plan for you.

We also recommend that your family accompany you to your meeting with your adviser, especially if they could be impacted by any decision you make.
 

Consider the facts carefully

If you’re considering equity release, be sure to check out ‘Is it right for you?’ before taking action.

It’s also important to note that equity release will reduce the value of your estate, and could also affect your entitlement to means-tested benefits.