What is equity release?

Quite simply, equity release schemes enable you to release cash from the equity built up in your property.

They are designed to help homeowners who would otherwise struggle to take on a regular mortgage and the associated monthly payments to enjoy the value built up in their home in whatever way they wish. The minimum age is typically 55 for lifetime mortgages and 60 for home reversion plans.

Lifetime mortgages are the most common type of scheme. They enable you to take out a loan on your property in return for a lump sum, an income or a combination of the two. Importantly, you continue to own your home and will not have to make any monthly repayments although it is also good to know that should you wish to meet the monthly cost or even part thereof then you can do that too. The debt will be repaid only when you or the last survivor pass away or goes into long-term care, essentially permanently leaving the property. If the interest is not paid throughout the term of the policy then it will accumulate and the eventual amount to be repaid will increase.

Home reversion schemes account for a tiny part of the market as they offer less flexibility. With these, you sell all or part of your home to a company in return for a lump sum or regular income whilst retaining the right to remain living there. When the property is eventually sold you or your estate only receive the percentage of the property’s value that you still own. If, for example, you have sold 60%, you will only keep 40% of the final sale price.