Guide To Equity Release

Release Cash From Your Home

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Finding  the right equity release plan for your personal circumstances couldn’t be simpler

See below for a range of selected offers from leading UK equity release providers

Type
Fixed
Rate
3.32%
APR
3.48%
Minimum Age
55
Minimum Property Value
£100,000

Equity Release Plan: Classic Super Lite

Features: FREE Valuation

Equity Release Calculator »

Type
Fixed
Rate
3.32%
APR
3.50%
Minimum Age
55
Minimum Property Value
£100,000

Equity Release Plan: Flexi Choice Super Lite

Features: FREE Valuation

Equity Release Calculator »

Type
Fixed
Rate
3.35%
APR
3.50%
Minimum Age
55
Minimum Property Value
£100,000

Equity Release Plan: Classic Drawdown Lite

Features: FREE Valuation

Equity Release Calculator »

Type
Fixed
Rate
3.40%
APR
3.50%
Minimum Age
55
Minimum Property Value
£100,000

Equity Release Plan: Premier Flexible Black

Features: Cashback & FREE Valuation

Equity Release Calculator »

Type
Fixed
Rate
3.49%
APR
3.60%
Minimum Age
55
Minimum Property Value
£100,000

Equity Release Plan: Flexible Pink

Features: Cashback & FREE Valuation

Equity Release Calculator »

Type
Fixed
Rate
3.75%
APR
3.90%
Minimum Age
55
Minimum Property Value
£75,000

Equity Release Plan: Lifestyle Flexible

Features: Cashback & FREE Valuation

Equity Release Calculator »

Type
Fixed
Rate
3.93%
APR
4.10%
Minimum Age
60
Minimum Property Value
£100,000

Equity Release Plan: Flexible Lifetime

Features: FREE Valuation

Equity Release Calculator »

Type
Fixed
Rate
3.99%
APR
4.20%
Minimum Age
55
Minimum Property Value
£70,000

Equity Release Plan: Capital Select Lite Flexi

Features: FREE Valuation

Equity Release Calculator »

Type
Fixed
Rate
4.22%
APR
4.40%
Minimum Age
55
Minimum Property Value
£70,000

Equity Release Plan: Select Lite Flexi

Features: FREE Valuation

Equity Release Calculator »

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Guide to Equity Release

What is equity release?

Equity Release is a way of releasing capital that is locked up in the value of your home without having to move. The equity (value) in your home is defined by its open market value minus any debt held against it.

Who qualifies for equity release?

Equity release schemes are aimed at older people who own their homes outright, so you have to be over a certain age (usually over 50) and own your own home.

How does equity release work?

When you take out an equity release scheme, you receive the money that has been unlocked from the value of your home either as a lump sum payment, regular payments, or both, to use as you wish. You continue to live in your home and retain responsibility for its maintenance.

Are there different types of equity release schemes?

Yes, there are two main types of equity release – lifetime mortgages and home reversions.

What is a home reversion scheme?

With a home reversion scheme, you sell all or part of your home to a reversion company, or an individual sourced by a reversion company. You therefore no longer own your home, but you can remain living there as a tenant for as long as you wish.

With a home reversion scheme you have the money as a lump sum and can then reinvest this to provide you with regular payments, and you can continue living in your home for the rest of your life.

How does a lifetime mortgage work?

With a lifetime mortgage, you take out a loan that is secured against the value of your home. You continue to own your home, and the loan is paid back using the proceeds from the sale of your home, which will be sold either when you die or if you move permanently into a care or residential home.

Are there different types of lifetime mortgage?

Yes, there are four main types of lifetime mortgage:

1. Roll up mortgage

  • You can receive a lump sum or ad hoc amounts
  • Interest is added to the loan amount annually or monthly
  • The interest you owe is ‘rolled up’ so you do not have to pay it until your home sold.

2. Interest only lifetime mortgage

  • You get a cash lump sum or ad hoc amounts
  • You pay interest on the loan each month
  • You pay back the amount you borrowed when your home is sold

3. Fixed repayment lifetime mortgage

  • You get a cash lump sum
  • You don’t pay interest each month or at the end, but agree to pay the lender a higher sum than you borrowed when the house is sold
  • You decide on this sum at the outset

4. Home Income Plan

  • You get a cash lump sum
  • You use this lump sum to buy an annuity that supplies a regular income
  • The interest on your loan is paid by using the annuity
  • The loan is be repaid when your home is sold
What are the benefits of equity release?

Many of the older generation are ‘property rich, cash poor’ because their home has increased in value significantly, but their pension or other income is not enough for a comfortable lifestyle.

Before equity release schemes were available, the only way of unlocking this capital was by downsizing. But for many people, a home is more than just bricks and mortar, it holds memories and they don’t want to move.

Equity release allows you to benefit from the cash released without having to actually move. And, with life time mortgages you can still benefit from any further rises in the value of your property.

What are the drawbacks of equity release?

Equity release can reduce the value of your estate and therefore, the amount of inheritance you are able to leave behind. They involve borrowing against or selling all or part of your home, which can work out more expensive than other methods of raising the funds you need, e.g downsizing. Equity release can also affect your entitlement to means-tested benefits and grants.

A drawback of home reversion plans specifically is that they can be poor value for money; the sum received will be significantly less than the true market value of the property – usually only between 35 per cent and 60 per cent. This is because the buyer cannot sell your home until you die or move out. Therefore, the older you are when you start the scheme, the more you are likely to get.

What are the alternatives to equity release?

If your property has risen in value, there are a couple of alternatives to equity release. The main and most common alternative is to buy a cheaper property. If you choose to do this, you have two options:

  • Buy a smaller house in the same area
  • Buy a house the same size, but in a cheaper area

The advantages of downsizing is that a large amount of tax free cash can be raised, the disadvantage is that you have to move, and uprooting can be especially difficult for the elderly in terms of their health and the emotional attachment they may have for the area in which they live.

Another alternative to equity release is a ‘low cost mortgage’, this is for the elderly that still have a decent income – they can look to take out a simple mortgage to release equity built up within a home. It is preferable to an equity release scheme but then it is not open to everyone.

Are there fees and costs with equity release?

Yes, there will typically be an arrangement fee, of between £300 and £500 and a valuation fee, which will be linked to the value of the property, but it will probably be around £300. You will also have to pay legal costs of between £300 and £700 and if you repay your lifetime mortgage before the end of the contract, i.e., before you die or move out, you may have to pay an early repayment charge, but this will differ between lenders.

With some home reversion plans, there are rental charges. This is because you no longer own all or part of your home, so are effectively a tenant. Not all home reversion companies will charge rent and even ones that do, the fee will be minimal.

What happens if I want to move?

Most lifetime mortgages can be transferred to another property, so you can move house. If your new property is of lower value, you will generally have to repay part of your lifetime mortgage. If your lender will not allow you to transfer the scheme, you will have to repay the whole of the lifetime mortgage using the proceeds from the sale of your home.

A home reversion plan is not portable as you have sold all or part of your house. By choosing to leave the property, the lease is terminated and the reversion provider is free to sell the property. . After the house has been sold, any proceeds due to you may not be enough to buy a new property.

What if I owe more than the property is worth?

If you have a roll-up lifetime mortgage, the interest being added to the property can grow quite quickly, and if it rose to more than the value of the property, you would be in negative equity, which is where you owe more than your property is worth. If this happens, the lender may ask you to start paying interest, or, after your death, your beneficiaries would have to pay the extra. However, all reputable providers of equity release schemes are members of “SHIP” – Safe Home Income Plans and subscribe to the Code of Conduct which provides a “no negative equity guarantee”.

What happens to my partner if I die?

If the equity release scheme was taken out jointly, the scheme will continue as before. If it was in your name alone, the property would have to be sold and your partner would have to move out, unless they could afford to repay the lifetime mortgage in full.

Equity release is available to UK homeowners aged between 55 and 95 and allows you to release capital from your home. The money released can be used for any purpose, and can be taken as a tax free lump sum or in smaller amounts if preferred.

Key features include:

  • Available to homeowners aged 55 to 95
  • Release capital tax free from your home
  • You choose how to spend the money
  • Lump sum & drawdown options
  • You cannot release equity without taking advice

You can release equity from your home with either a lifetime mortgage or a home reversion scheme. The most popular type of equity release is a lifetime mortgage, where a loan is secured against your home & you retain full ownership of your home.

Key features include:
  • The amount you can release will depend on your age
  • The minimum age you can be is aged 55 with 95 as an upper limit
  • The minimum property value on which an equity release plan can be secured on is £70,000
  • The older you are and the higher the value of your property the more equity you can release

When capital is release by the plan provider, instead of making monthly interest repayments, interest is usually added to the loan. this is known as compound interest. At the end of the plan (usually when either of you pass away or move into long term care) your house will be sold & the equity release plan provider will be paid back from the house sale proceeds with the balance paid to your estate.

 

There are different types of equity release plan and can be summarised as follows:

Lump sum lifetime mortgage
  • Provides a tax free lump sum secured against your home giving you access to a pot of cash.
  • Funds released can be used for almost any purpose
  • You retain full ownership of your home
  • Interest rolls up and is added to the loan. Typically repaid when you pass away or move into long term care
  • Some plans allow you to guarantee  a percentage of the future value of your home for your loved ones’ inheritance. Other options include the option to pay monthly interest
  • You need to take advice before you can take a lifetime mortgage out
Drawdown lifetime mortgage
  • Lets you drawdown cash in stages after an initial lump sum
  • You will only pay interest on the funds drawn down
  • These plans are more flexible so you do not miss out on means tested benefits
  • Drawn down funds can be used for any purpose e.g. home improvements, pay for university fees
Home reversion plan
  • Need to be aged 65+ to qualify
  • Involves selling all or part of your home for a tax free cash lump sum
  • The money you receive can be used for any purpose
  • Your share of the property will benefit from house price increases
  • When you pass away or sell your home, the home reversion provider takes its percentage from the sale proceeds.

For a quick estimate of what you could borrow use the link below:

Equity Release Calculator »

A lifetime mortgage is a loan secured against your house that allow you to release some of the equity you have built up.

Also known as equity release mortgages, like retirement interest only (RIO) mortgages they are only available to over-55s, and the loan is fully paid off when the last person living in the property dies, sells the home or goes into care.

The main difference is that RIO mortgages require borrowers to pass affordability checks and commit to making regular payments for life. With an equity release plan there are no such checks required.

There are a number of variables that can determine how much you may be able release from your home.

The key thing are your age and the value of your property.

The table below provides an approximate indication of how much equity you can expect to release from your home depending upon how old you are from a lifetime mortgage (Home Reversion Plans may offer a higher amount):

 

AGE    % OF EQUITY RELEASE
5525
5626
5727
5828
5929
6032
6133
6234
6335
6436
6537
6638
6739
6840
6941
7042
7143
7244
AGE    % OF EQUITY RELEASE
7345
7446
7548
7649
7750
7851
7951
8052
8152
8253
8353
8454
8554
8654
8754
8854
9054

Lifestyle factors can also come into play, so if you are a smoker or are overweight the amount you can release may be increased.

For a quick estimate of what you could borrow use the link below:

Equity Release Calculator »

FREE & no obligation – Equity release service

Equity Release Quotes >>

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Equity release may affect your entitlement to state benefits and will reduce the value of your estate. It may involve a lifetime mortgage or home reversion plan. All content set out in this website is provided for information only and should not be considered as advice. It is strongly recommended that you seek advice of a qualified, independent financial advisor before making any decisions to take out an equity release product.

Equity Release

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Equity Release Service

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE