What does Equity Release mean?

28th March 2020

What is equity release?

An equity release plan allows homeowners aged 55 and over to access some of the tax-free cash locked in the value of their home.

The value of your home, minus any outstanding mortgage and any other loans secured against it, is the equity you have in your property. This equity is often passed on as an inheritance, however, an increasing number of people are tapping into some of this wealth to help boost their retirement finances.

Most people who take out equity release, choose a lifetime mortgage, which is a loan secured against your home. With the flexibility of these plans, you can choose between taking your tax-free cash in one lump sum or have it available to drawdown as and when you need it following an initial, smaller, lump sum release. With a drawdown plan, you only pay interest on the money released.

There are typically no monthly repayments for you to make with a lifetime mortgage, as the loan, plus roll-up interest (also known as compound interest), is repaid when the plan ends. That’s usually when the last remaining applicant either passes away or enters long term residential care.

Will I still own my own home?

With a lifetime mortgage, you’ll still own your home and can stay in it for as long as you like, subject to your plan’s terms and conditions.

Will I ever fall into negative equity?

No. All plans that meet the Equity Release Council’s standards come with the no negative equity guarantee, meaning you’ll never owe more than your home’s worth.

Can I move house?

Yes. All plans that meet the Equity Release Council’s standards allow you to transfer your plan to a new home (subject to criteria).

Can I still leave an inheritance?

Yes, you can. Some lifetime mortgages guarantee that a set percentage of your home’s value, at the time your plan ends, will form part of your estate for you to pass on to others in your will.

Can I take out equity release if I still have a mortgage?

Yes, however, you’ll need to repay the mortgage using the money released. Any leftover funds are yours to enjoy.

If you would like to know more about equity release, please feel free to get in touch with and we can refer you to one of our specialist advisers.
With mortgage and protection advisers in Winchester, Southampton, Farnham, Bishops Waltham, Alton, Chandlers Ford, Alresford, Romsey and Park Gate, you are never too far from expert advice.

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