Equity release lets you access tax-free cash from your home.
There are lots of reasons people take it out. Common ones include paying off debt, gifting to family or making home renovations.
You can only take out equity release through a qualified financial adviser – if you don’t have one, you can find one at Unbiased. Your adviser will make sure that you:
- only borrow as much as you need
- understand how the product works
- are sure that it’s the right choice for you.
What is equity release and how does it work?
Equity release is a way of releasing cash from your home. You can do this through a lifetime mortgage or a home reversion plan. We go into more detail about these two products and how you can access the money in our article 'How equity release works'.
Depending on the product you choose, you can access the money:
- as one lump sum
- in small, ongoing amounts
- as a combination of the two.
Note that any payments you get can affect any means-tested benefits you’re getting.
When you’re releasing equity through a lifetime mortgage, you can choose to repay all, some or none of the interest each month. If you choose a product that doesn’t include monthly interest repayments, your provider will add any interest to your loan. The amount you owe can build up quickly. That will cut down any inheritance you can leave your loved ones. The money itself doesn’t need to be repaid until you die or move into long-term care.
With a home reversion plan, you can sell between 25% and 100% of your home and the money is paid back through the sale of your home after you die or move into long-term care.
On the plus side, with most equity release products you won't have to worry about negative equity, which means owing more than the value of your home. Most UK equity release products are overseen by the Equity Release Council (ERC), which mandates a No Negative Equity Guarantee for them.
Hopefully that’s answered your basic questions about what is equity release. UK readers can find out more by reading our articles about:
