What is it?
In it’s simplest form, Equity release is a mortgage that allows you to release money tied up in your home. It is designed for people who do not want to move home and hope to remain in their house until their death or when they need to enter long term care.
What are the benefits?
An Equity Release product enables you access to funds stored in your house without the need to move or downsize. The amount borrowed will depend on your circumstances including how old the youngest homeowner is and how much your house is valued at. If you’re eligible you can use the money for anything you want, whether it’s home improvements, as an income supplement, for holidays, gifts for loved ones or funding a dream hobby.
How does it work?
There are two main types of Equity Release products on the market: Lifetime Mortgages and Home Reversions.
A Lifetime Mortgage is a mortgage that is paid in full when the house is sold (usually either on your death or when you enter long term care). Interest is payable and is usually “rolled up” with the loan and payable when the house is sold, however it is important to note that Equity Release mortgages are changing and some new products are more flexible allowing you to opt to pay the interest off in monthly instalments.
A Home Reversion Plan allows you to sell all or part of your home whilst maintaining the right to live in it. There is no day-to-day interference and no restrictions as to what you can do, except that you should keep the home in a good condition. There is no interest payable at any point.
Is it safe?
Equity Release products were first introduced in the 1960s, but it was the more notorious plans of the 1980s that people remember today. The horrendous situation many families found themselves in, led to the foundation of the Equity Release Council (formally known as Safe Home Income Plans). The Council have a strict code of conduct that ensures products offered today are safe and that homeowners receive clear information explaining the term and conditions, costs, risks and benefits of each plan.
Will it affect my family’s inheritance?
Yes. An Equity Release product allows you to access money you have built up in your home as a loan and so proceeds from the sale of the house will be used to repay the amount borrowed and therefore cannot form part of your Children’s inheritance.
However there are products available that allow you to ring fence a percentage of your home to protect as an inheritance.
How can I find out more?
Visit our dedicated Equity Release website to learn more and order your free Equity Release Guide.