How does equity release work?
Equity release allows homeowners over the age of 55 to unlock the value of their property without the need to sell or downsize.
In principle, equity release schemes come in two formats:
Lifetime mortgages are a type of mortgage secured on your property which can be your main residence, second home or even a holiday home.
Homeowners continue to own their home and can choose either a single cash lump sum, income or take smaller chunks of money over time – known as drawdown. All the money released is tax-free and the homeowners get to stay in their property until they die or go into long-term care.
The money raised from any equity release scheme can be used for any legal purpose: from home improvements to clearing existing debts or mortgages.
And if it’s just some extra funds needed to buy a new car or a once-in-a-lifetime trip, that’s fine too – we never tell you what to do with your money.
Home reversion plans allow you sell a percentage of the value of your property in return for a tax-free cash lump sum, or series of capital amounts. The home reversion provider offers a lifetime tenancy to the homeowners, enabling them to live rent free in their home for the rest of their lives.
Although home reversion has a minor role in today's equity release market, they still provide peace of mind as a way of releasing tax-free cash AND guaranteeing an inheritance for your beneficiaries.