Types of Equity Release

 

Equity release always means releasing some of the money from your home – but there are a number of different types of equity release plans available. Each of these options comes with its own benefits, terms and features.

We recommend that you use the information on this page to get an overview of each option. Then you can investigate what these individual plans offer in more depth.

 

Lifetime Mortgages

The most common type of equity release plan is the lifetime mortgage; a loan which is secured against your property. These allow you to release a lump sum payment or, in the case of a lifetime mortgage drawdown plan, enable you to release smaller sums of money as needed after the initial release.

There are a number of additional options within the lifetime mortgage category, including protected plans, enhanced plans, combined plans and interest payment plans. Each of these is explained in more depth on our lifetime mortgage page.

 

Home Reversion Plans

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. There is no interest charged on a home reversion plan, and you are able to remain in the home for as long as you wish. However, you will not receive full market value for the property, and your estate will not benefit from the full extent of any increase in the house’s price.

You will still be able to leave your share of the property as an inheritance, and your estate will benefit from increases to this percentage of the property’s price.

 

So which option is right for you? That decision comes down to a lot of different factors, including:

  • The amount of money you would like to release
  • How much money 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 and your partner are
  • Whether you would like to ensure that some money is reserved as an inheritance
  • Your general health and lifestyle

 

This means that talking to an expert adviser is essential. They will be able to discuss each factor with you before then helping to identify an appropriate plan. We also recommend that family or friends accompany you to your meeting with an adviser, especially if they may be impacted by any decision that you take.

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

 

Keep yourself well informed, and be sure to read ‘is it right for you?’ if you’re considering equity release. Equity release reduces your estate’s value, and may affect your entitlement to means-tested benefits. A lifetime mortgage is a loan secured against your home.

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A lifetime mortgage is a loan secured against your home.