How does equity release work?

How does equity release work?

Equity Release is the umbrella name for products that provide consumers with a way of releasing the wealth tied up in their property without necessarily having to sell it and move to another home.

There are two main types of equity release, both are regulated by the Financial Conduct Authority which means firms advising on and providing these plans must meet clear standards.

The most popular type of equity release is a Lifetime Mortgage whereby customers retain full ownership of their home, and this is the only type of equity release plan we recommend.

The value of your home, minus any outstanding mortgage or any other lending secured against your home is described as your equity.

Because the funds are yours in the first place, a Lifetime Mortgage is simply a way of releasing them, and the money you receive is tax-free and can be spent on anything you like.

With no monthly repayments to worry about, although you can choose to service all or part of the interest and even make capital repayments if required, the loan and any interest accrued is repaid on either the sale of the property, entering long term care or death (of the surviving partner for joint applications).

The other type of equity release is a Home Reversion Plan where customers sell part or all of their home in exchange for a cash lump sum while retaining the right to remain in it, typically rent free. We do not provide advice on these products.