Skip to the content

A guide on Equity Release

What is Equity Release?

Equity Release is a term that many people may have heard before but do not understand the full extent of what it could mean for them.

In simple terms, Equity Release is something available to homeowners aged 55 and above. The term encompasses a range of options enabling homeowners to access tax free funds tied up in their property.

There are different Equity Release plans homeowners can opt for, some meaning you do not have to move out of your home or make monthly payments initially.

There are two main types of Equity Release plans, Lifetime Mortgage and a Home Reversion Plan.

A lifetime mortgage is the most common option when it comes to Equity Release. Home owners can borrow money secured against their property. The mortgage is typically repaid in full with the sale of the property when the homeowners pass away or move into permanent residential care.

A home reversion plan consists of homeowners raising money by selling all, or part of your home while continuing to live in their home, until they pass away or move into permanent residential care.

How does Equity Release actually work?

By opting for a lifetime mortgage, this can be a way of funding your retirement or later life with the cash tied-up your property.

Your mortgage adviser can let you know how much you are able to borrow but this will depend on the Equity Release plan that you opt for. It’s always a good idea to speak openly with your mortgage adviser explaining what your future plans are along with your current financial situation.

Why do people opt for Equity Release?

  • To supplement your pension or other income
  • To buy a new car
  • To make home improvements or adjustments for accessibility
  • To go on holiday

The most common form of Equity Release is a Lifetime Mortgage whereby you borrow a certain amount of money but secure it against your home. This doesn’t require repayments unless you choose to do so, however if you go into long term care or pass away, the life time mortgages with interest must be repaid.

What are the benefits of Equity Release?

  • You could obtain a tax-free cash in one lump sum or receive regular payments as and when you need them to supplement your income – this is known as a ‘drawdown’
  • You can still live in your own home, there is no need to downsize
  • You can continue to benefit from the increase in value of your home
  • Equity Release is transferable and you can still move to a suitable property if your circumstances change
  • Equity Release gives you financial freedom as the money you release from your property is yours to do whatever you wish with

Things to consider

The idea of Equity Release and whether it’s a good idea or not is dependent on your current circumstances and your plans for the long term future. A good place to start is to discuss this with your family as it’s an important decision to make. Speak with a financial adviser to clarify your options.

Contact us today if you wish to speak with one of our advisers at Just Mortgages.

You will need to take legal advice before releasing equity from your home as Lifetime Mortgages and Home Reversion plans are not right for everyone.

Mortgage Advice

Our experienced Just Mortgages Advisers are based across the UK. Book an appointment to discuss your options.