Equity Release

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):

 

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 »