Equity Release is a financial product that allows homeowners, typically aged 55 or older, to access the equity (value) tied up in their property without having to sell their home. It is a popular option for retirees looking to supplement their income, cover living expenses, or fund major purchases, such as home improvements or healthcare costs. The two main types of equity release are lifetime mortgages and home reversion plans.
How Equity Release Works
With equity release, the homeowner borrows a portion of the value of their property, either as a lump sum, a regular income, or a combination of both. The loan is secured against the home, and no repayments are typically required during the homeowner’s lifetime. Instead, the loan is repaid when the homeowner dies or moves into long-term care. At that point, the property is sold, and the loan plus any accrued interest is settled.
When applying for equity release, you will go down one of these two routes:
- Lifetime Mortgage:
A lifetime mortgage is the most common form of equity release. With this option, you retain ownership of your property while taking out a loan secured against its value. The loan accrues interest, and no payments are made until you pass away or move into care. At this point, the loan is repaid from the sale of the property. The amount repaid is typically higher than the initial loan due to compound interest, but the balance is capped, so the debt won’t exceed the value of the home. - Home Reversion Plan:
A home reversion plan involves selling a percentage of your property to a reversion company in exchange for a lump sum or regular income. You continue to live in the property rent-free for the rest of your life. When the property is sold, the reversion company receives the percentage of the sale price that corresponds to the share of the property they own. This option does not accrue interest but means you give up a portion of your property’s value.
Equity Release / Lifetime Mortgages / Home Reversion Plan will reduce the value of your estate and can affect your eligibility for means tested benefits.
No Monthly Repayments
A choice between making regular repayments or choosing no monthly repayments, easing financial pressure.
Stay in your Home
You maintain ownership and can continue living in the property.
Flexible Payment Options
Some plans offer flexible repayment options, and you can choose between a lump sum or regular payments.
Reduced Inheritance
The value of your estate may be reduced, affecting what you can pass on to beneficiaries.
Interest Accural
In the case of lifetime mortgages, the interest can accumulate over time, potentially leading to a larger debt.
If you have any questions regarding equity release please get in touch with our team of qualified mortgage brokers for a no obligation chat.
Whilst historically there was considerable negative press about equity release, today it is a regulated product and all firms providing advice should be regulated by the Financial Conduct Authority.
The amount you can raise through equity release depends on several factors, including the value of your home, your age, and the type of equity release plan you choose. Generally, the older you are, the more equity you may be able to access. To get an accurate estimate tailored to your situation, our advisors at Digby Associates are fully qualified to guide you through the process. Contact us today for expert advice on how much equity you could release.
Yes, with most equity release plans, such as a lifetime mortgage, you remain the owner of your home. The plan allows you to live there for as long as you wish, while the loan and interest are repaid when the property is sold (usually upon your passing or moving into long-term care). At Digby Associates, our advisors specialize in equity release and can help you understand how it works and whether it’s the right choice for you. Get in touch for tailored advice.
Yes, you can still take equity release if you have an existing mortgage, but you’ll need to use some of the funds from the equity release to pay off the remaining mortgage balance. This is a common scenario, and our experienced advisors at Digby Associates are here to help you navigate this process smoothly. Reach out to us for personalized guidance.
Yes, many equity release plans offer the flexibility to move to a new property, as long as the new home meets the lender’s criteria. This means you can still relocate in the future if needed. Our qualified advisors at Digby Associates can explain how moving with an equity release plan works and help you find a plan that suits your lifestyle. Contact us to learn more.
It is possible to leave an inheritance, depending on the type of equity release plan you choose. Some plans allow you to ring-fence a portion of your home’s value for inheritance purposes. Additionally, repaying the loan early or managing how much equity you release can also help preserve your estate. At Digby Associates, our expert advisors are equipped to help you explore options that align with your goals, including leaving an inheritance. Get in touch for advice tailored to your needs.
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