What Is Equity Release?

 

Equity release plans – also called lifetime mortgages, home reversion or home income plans – is a way of releasing cash from your home for either a one of purchase or to maintain your current life style into retirement. Equity release schemes essentially allow you to borrow money against the value of your home, with the debt being repaid from the sale proceeds after your death.

How Equity Release Plans Work

While there are a range of different schemes offering lump sums and/or regular income, they all work on the same principle: they lend you a part of your home’s value in return for a share of the proceeds when you die. In most cases you will need to be a home owner and at least 60 years of age.

 

Types of Equity Release schemes.

There are many types of equity release schemes all with ther own advantages & disadvantages. With home reversion equity release schemes you sell your home or a share of it to an equity release company for a lump sum or in return for a monthly income (or a combination of both). Technically you become a tenant, albeit with the right to continue living in your home rent-free (or sometimes for a nominal rent) for the rest of your life. When the property is sold – usually when you die – the reversion company gets its percentage of the sale including any growth. Another type of equity release scheme is a lifetime mortgage, with this type of sceme the lender gives you a lump sum or monthly income (or both). You pay nothing – the interest is ‘rolled up’ into the loan. The amount borrowed plus this interest is repaid out of the proceeds from the sale of the property after you die. How much you can borrow depends on the value of your home and your age – the older you are, the higher the percentage of your property’s value you can borrow.

 

Your home may be repossessed if you do not keep up repayments on your mortgage. Please consult a qualified financial adviser before considering any form of equity release.