What is Equity Release?
Equity Release is a safe, secure way to release the money tied up in your home, without having to move out.
It provides you with an opportunity to release tax-free cash from your home to spend as you wish, whilst enabling you to remain in your property for the rest of your life.
The two main types of Equity Release plans are Lifetime Mortgages and Home Reversion.
Lifetime Mortgages
A Lifetime Mortgage is a form of Equity Release that enables you to borrow a sum of money secured against your home, whilst retaining full ownership of the property. Depending on your Equity Release requirements, the money you release can be taken as a cash lump sum, regular monthly payments, drawndown as required, or a combination of these and you may also have the option to release further cash in the future.
How do Lifetime Mortgages work?
As with a normal mortgage, you borrow capital that is secured against your home. The majority of Lifetime Mortgage plans do not require any repayments, instead “rolling-up” the interest into your initial loan amount. When you pass away or move out of your home, the property is sold and the money from the sale is used to pay off the original loan plus any interest that has accumulated over the loan period. Any equity that remains after the loan has been repaid belongs to your estate.
You may elect to borrow a lump sum of money from your property or alternatively opt for a drawdown facility, meaning that you release the cash in regular instalments or as you require. The speed at which the interest accumulates can vary depending on the amount you release, and they way in which you choose to release it. Please visit Our Plans for more information about the particular Lifetime Mortgage plans available.
Home Reversion
Home Reversion plans enable you to sell part, or all of your home to a reversion provider for a fixed tax-free lump sum, regular income, or combination of these. You are granted a guaranteed lifetime lease meaning you can continue living in the property for the rest of your life.
How does Home Reversion work?
Your home, or the part of it you sell, belongs to the reversion provider, but you can continue to live in it for the rest of your life, or until your relocation to long-term care. This means that you sell the legal ownership of your home but will be guaranteed the right to stay there for as long as you wish through a lifetime lease. In the case of joint applications, this applies to both parties, so that you are both assured to remain in the property for the rest of your lives.
Your age is a primary factor in determining the percentage of equity released from the survey value of your home. Other factors, such as your gender and the estimated future value of your property, are also taken into consideration.
Any mortgage or secured loans that you have when entering into a Home Reversion plan must be repaid on the initial sale of your property to the reversion provider. It is also important to consider that as you no longer own all or part of your home, a Home Reversion plan may be unsuitable for anyone wishing to leave the equity in their property as an inheritance for their next of kin.
For a more detailed description of the specific Lifetime Mortgage and Home Reversion plans we provide advice on, including their respective advantages and disadvantages, please visit Our Plans. Alternatively, if you would like to discuss your Equity Release options call the team free on 0800 169 5723. They will be happy to discuss the various Equity Release plans with you and help you decide which plan may be best suited to your specific needs and requirements.
Equity Release may involve a Lifetime Mortgage or a Home Reversion plan. To understand the features and risks, please ask for a Personal Illustration.