Equity Release Jargon in 2022

Know Your Equity Release Jargon as Confusion Will Cost
Contributors: Nicola Date, Katherine Read. Reviewed by Francis Hui
Are You Confused by All the Equity Release Jargon? It Doesn’t Have to Be a Tricky Concept. We’re Here to Help You Wrap Your Head Around It Once and for All. Here’s a List of the Most Important Jargon You Should Know.

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If you’re looking to unlock the money in your home, you’re probably overwhelmed with the endless equity release jargon being used by experts.

Fear not! Equity release is simpler than you think.

Here’s a list of the most up-to-date equity release lingo in 2022 that’s bound to keep you in the know.

Let’s find out now!


Your A-Z Dictionary of Equity Release Jargon


AER (Annual Equivalent Rate)

The annual equivalent rate (AER) is the actual interest rate an investment, loan, or savings account will produce after taking into account compounding.

AER is also known as the effective annual interest rate or the annual percentage yield (APY).


Affordability checks are there to ensure that you have the means to repay any mortgage or loan that you apply for.

A bad score on an affordability check might result in the lender being unable to process your application.

Since equity release is a secured loan and no repayments are required in your lifetime, you won’t need to undergo affordability checks.


An annuity1 is a set amount of income that’s paid to an individual in pre-determined intervals, usually once a year.

The money is a return on an amount invested by the individual who receives the regular equity.

APR (Annual Percentage Rate)

An annual percentage rate is expressed as an interest rate. It calculates what percentage of the principal you’ll pay each year by considering things such as monthly payments.

APR is also the annual rate of interest paid on an investment, without accounting for the compounding of interest within that year.

Arrangement Fees

An Arrangement Fee is a fee charged by lenders for arranging credit,

Usually for a mortgage or a business loan, and it is generally used with equity release schemes.

However, some lenders waver the arrangement fee.



A person your estate is left to is known as a beneficiary. This will be stated in your will and is actioned upon your death.

An individual or estate can have more than one beneficiary.

Buy-To-Let Lifetime Mortgage

Since 2009, lifetime mortgages have been available on and off for equity release on buy-to-let properties.

These initial loans required a short-hold tenancy agreement and were only approved if rental income covered at least the interest charged by the lender.



In finance, capital is money or liquid assets that are held or acquired for expenses.

The term may be expanded to include all of a company’s assets with monetary value, such as its equipment, real estate, and goods inventory.

When it comes to budgeting, however, capital is cash flow.

Capped Interest Rates

A capped rate is a loan’s interest rate with a maximum limit on how much interest can be charged.

A benchmark interest rate below the cap’s limits is used to calculate and adjust what’s paid, within the limits of the cap’s restrictions.

The cap prevents the borrower from being impacted by a surge in interest rates.

Cash Reserve Facility

Cash reserves are short-term investments that allow consumers to get access to their money quickly.

You will have access to a cash reserve if you opt for a drawdown equity release plan and only pay interest on the money you withdraw.


Collateral2 is an asset that a lender accepts as security against a loan.

It’s a surety that even if the loan isn’t paid back in cash, there’s a valuable asset to replace the income, and a guaranteed form of return.

Depending on the purpose of the loan, collateral might be real estate or another type of valuable asset.

In the case of equity release, it’s your home that serves as collateral.

Completion Fee

A Completion Fee (also known as an arrangement fee) is a fee charged by lenders for arranging credit,

Typically for a mortgage or business loan, and occasionally for car financing.

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Compound Interest

The interest on a loan or deposit that is calculated based on both the original amount and the accrued interest from previous periods,

Is known as compound interest (or compounding interest).

Compound interest, which is defined as “interest on interest,” will make a sum grow at a greater rate than simple interest, which only considers the original amount.

Lifetime mortgages usually have compound interest attached to the loan.

Consumer Price Index (CPI)

The Consumer Price Index (CPI)3 is a metric that measures the weighted average of prices for the collection of consumer goods and services.

The CPI is used to assess price rises associated with costs of living.


Direct Provider

Getting financial advice is compulsory with equity release.

However, some lenders have in-house advisers, so you won’t need to seek counsel from an independent adviser.

These are referred to as direct providers.


The act of paying cash out is known as a disbursement.

The term disbursement may be used to describe money paid into a firm’s operating budget, the transfer of a loan amount to a borrower, or the payment of a dividend to an owner.

Discretionary Income

Discretionary Income, also known as disposable income, is the cash left over from your income after paying for life essentials, like tax, bills, and living costs.


Downsizing is the act of selling your current property in exchange for a cheaper or smaller home.

This is the most common equity release alternative.

Downsizing Protection

The Equity Release Council’s downsizing protection allows you to move and pay off your equity release mortgage in full,

If the new lender doesn’t consider your property as suitable collateral.

Drawdown Lifetime Mortgage

Drawdown lifetime mortgage plans are designed for the homeowner to open a cash reserve where their equity release income is stored.

The money is then available to be withdrawn, whenever the homeowner needs cash.

The minimum withdrawal amount is usually £2,000 and you’ll only pay interest on the money you withdraw.


Early Repayment Charges

Equity release loans are intended to last throughout the course of your lifetime.

However, if you need to end your plan early, due to unforeseen circumstances, you may need to cover early repayment charges.

This can be up to 5% of the total loan amount.

Enhanced Lifetime Mortgage

An enhanced lifetime mortgage is an equity release loan that’s designed to give homeowners low interest rates and more equity, should they be suffering from lifestyle or chronic conditions.

You’ll need to fill out a lifestyle questionnaire to qualify for an enhanced lifetime mortgage.

Illnesses that qualify could include cancer, diabetes, heart conditions, or obesity.


Equity is the cash portion of your property, not taking into account any part that’s mortgaged or still owned by the bank.

It’s the value in your property that belongs to you and can be extracted either through a sale or with equity release.

Equity Release

Equity release is a UK-based product designed for older homeowners.

It allows them to extract the value of their property, while still living there.

There are 2 types: lifetime mortgages and home reversion plans.

Equity Release Calculator

An equity release calculator is a tool designed to help lenders and financial advisers determine the amount of equity that’s available to unlock from your property, based on your age and property value.

Equity Release Council

The Equity Release Council is an industry body that regulates the equity release market.

They’re responsible for ensuring members act with integrity and transparency towards their customers – the borrowers.


Your estate is an accumulation of all your assets at your death, once all your debts are settled.

If you opt for an equity release plan, the value of your estate will be reduced.


Financial Conduct Authority (FCA)

The Financial Conduct Authority is an independent body regulating financial services in the UK.

As part of their portfolio, they oversee the equity release industry to ensure fair practice.

Financial Conduct Register

The financial conduct register is a list of all legitimate financial service providers operating in the UK.

Fixed Interest Rates

Upon a loan agreement, fixed interest rates are set for life.

This means that no matter the length of the loan period, your interest rate will never increase or decrease after the initial agreement is set in place.

To receive lower interest rates on an equity release, you’ll need to switch to a new plan.


Fraud refers to a criminal act where there’s an unlawful acquisition of money.

Advisers are always on the lookout for those who take out loans for illegal reasons, including when it comes to equity release.


With a freehold property, the resident is the owner of the land, home and all surrounding areas like gardens or garages.

Your property must be freehold or leasehold to meet release equity criteria.



Your heirs are the beneficiaries that you name in your will to receive your assets when you pass away.

While heirs are traditionally your children, they can be friends, or other family members, as long as this is clearly stipulated in your last will and testament.

Home Reversion

A home reversion is a form of equity release where you sell all or a portion of your property below market value, in exchange for tax-free cash.

Furthermore, you can live in the property, rent-free, for the rest of your life.


Impaired Life

When a homeowner has made poor life choices or is suffering from a health condition, this is known as an impaired life.

Individuals with an impaired life will qualify for an enhanced lifetime mortgage.


Income is a term used to describe the quantity of money an entity might make, save, or spend in a particular time period.

Independent Adviser

An independent adviser is a 3rd party financial adviser that’s not affiliated with any lender or equity release institution.

Instead, they provide whole-market equity release advice, looking at financial retirement opportunities across lenders and finding you the best equity release deals.

Income Lifetime Mortgage

An income lifetime mortgage is an equity release product designed to offer the homeowner a monthly salary to supplement retirement income.

This is a monthly payment that can be arranged to last up to 25 years.

Inheritance Protection

Inheritance protection is a feature offered by some lifetime mortgage lenders that allows you to set aside a portion of your estate as a guaranteed inheritance for your heirs.

No matter how much your loan amount grows, your lender can never access the protected equity.

Inheritance Tax (IHT)

If you inherit cash or property as a gift or inheritance, the acquired income may be subject to inheritance tax.

This levy was introduced in 1986 as a replacement for capital transfer tax.


The interest rate is the fee for borrowing money, generally expressed as an annual percentage rate (APR).

The amount of money a lender or financial institution receives for loaning out funds is known as interest.

With a lifetime mortgage, you’ll usually pay fixed, compound interest.

Interest-Only Lifetime Mortgage

An interest-only lifetime mortgage is a type of equity release designed for you to pay back the monthly interest, designed to stop the loan from compounding.

This will allow you to leave more inheritance to your heirs.


Joint Equity Release Plan

A joint equity release plan is designed for couples living together, who both own the property in question.

Unlocking equity through a joint plan will enable both homeowners to remain in the home until death or a move to long-term care.


KFI (Key Facts Illustration)

The KFI is a universal document the lender provides, breaking down the terms and conditions of your plan, so you have a detailed record of the equity release process.



A leasehold estate5 is a form of temporary ownership in which the lessee or tenant holds property rights through a title from a lessor or landlord.

During that time, the tenant holds rights to the property, on which their home sits.


A lender is a bank or financial institution that offers equity release plans, providing the homeowner with the money they unlock.

Lenders can offer lifetime mortgages, home reversions, and retirement interest-only mortgages.

Lifetime Mortgage

A lifetime mortgage is the most popular form of equity release designed for homeowners older than 55 to unlock the cash tied into their estate, while still living there.

The loan and compound interest are usually repaid through the sale of the property in question when the last homeowner dies or enters residential care.

Loan-To-Value (LTV)

Loan-to value refers to the portion or percentage of your house value that’s available to borrow with equity release.

For example, if you borrow £30,000 against your home and its value is £100,000, the LTV would be 30%.

Long-Term Care

Long-term care is a facility designed for the personal or health care of elderly citizens.

If you can no longer live independently, a care home is an option to get the support you need.


A lump sum is a large quantity of cash that’s received in one go.

In equity release terms, a lump sum lifetime mortgage is the most popular form of equity release, with 47% of customers selecting this option.


Means-Tested Benefits

Means-tested benefits are a form of financial aid for UK-based retirees.

The amount received is based on one’s retirement income and financial standing.

With the large cash injection that comes with most equity release plans, your eligibility for means-tested benefits may be impacted.

Mortgage Broker

A mortgage broker is a specialist adviser that deals with mortgages.

The mortgage broker work as a middleman who brokers mortgage loans for clients.

Traditionally, banks and other lending institutions have offered their own products.

However, the role of the mortgage broker has increased in prominence as markets have grown more competitive.


No Negative Equity Guarantee

The no negative equity guarantee is a rule implemented by the Equity Release Council,

To ensure that your family will never pay more than the sale price of your property to settle your equity release loan.

Any additional equity release debt will be written off. This is irrespective of whether property prices plummet.

PRO TIP: Never use an equity release provider that is not a member of the council!


Offer Document

Once a lender accepts a case, and they complete a valuation of your property, they’ll issue an offer document to all the parties involved.

This document gives you a breakdown of your personalised plan, and you’ll be able to look at any changes that happened after the KFI was issued.

Optional Payment Lifetime Mortgage

An optional payment lifetime mortgage allows you to make intermittent payments towards your equity release loan.

This can be up to 10% of the interest annually, and whatever you can on the interest, with a minimum of as little as £25 per month.


Personalised Illustration

This is an illustration from your adviser, which consists of a unique set of calculated data.

The data is based on the homeowner’s details and the equity release scheme they want to take.

Prevailing Rates

These rates are the available interest rates at the time that you drawdown from your reserve facility.

They may be higher or lower than the initial interest rate.

The prevailing rate will be applied at your drawdown time and any extra money you release.

Your funds will accrue interest at a different interest rate to your initial funds.


Your provider is the equity release company you choose to give you an equity release plan and finance it. It’s a synonym for lender.

While you can directly contact a provider and receive in-house advise, we always recommend opting for a whole market financial adviser who can find you the best provider to suit your needs.


A portable mortgage plan allows you to move your existing mortgage to a new property.

Equity release plans are portable if your lender approves the new home.

Power of Attorney

A power of attorney is a document that enables someone else to act on your behalf in private matters, businesses, or any other legal issue.

This is usually used if you’re no longer lucid or capable of running your affairs.

Any person given power of attorney must be a trusted loved one.

Prevailing Rates

The average current interest rate in an economy is known as the prevailing interest rate, which may also be referred to as the current market rate.

Various sorts of loans frequently have different prevalent rates.

Primary Residence

A primary residence is your main property where you live for at least 6 months of the year.

Equity release is designed to be unlocked from one’s primary residence.

Property Survey (Valuation)

Once the provider receives your equity release plan application, they’ll send someone to evaluate or survey your property.

This ensures that the value of your home estimate is accurate.

Therefore, the amount of money you can release will be in line with the LTV you agreed on.


Restricted Advisers

Restricted advisers work for equity release lenders and advise specifically on the plans they offer, without looking at the whole market.

While you’ll often find a better deal with a whole-market adviser, restricted advice often comes free with your equity release plan.

Retentions & Undertakings

The surveyor can identify what they consider as essential work on the property.

They’ll then recommend the provider retain some money until the job is finished.

The provider can choose to do so or attach an ‘undertaking’ condition to the offer.

The undertaking condition stipulates that any work done on the property must be done by a specific time.

Reverse Mortgage

A reverse mortgage is another word for a lifetime mortgage, commonly used in Australia, Canada and New Zealand.

Right to Remain

This right is a guarantee that you’ll be able to continue living in your house until the end of your equity release plan.

The end of the plan generally happens when you die or move into permanent care.

This is subject to some conditions, of course.

The plan’s requirements can include things like the state of the property, which needs to remain in good condition etc. Therefore, always read the T&Cs of your plan.

Roll-Up Lifetime Mortgage

A roll-up lifetime mortgage is a type of equity release plan where you unlock your cash through a lump sum, and the compound interest accumulate until the end of the loan period.


Secured Loan

A secured loan is a means of borrowing where there is a form of collateral against the cash you receive.

Since your home serves as collateral, equity release is a secured loan.


A solicitor is a professionally trained and qualified person who gives legal support and advice.


A surveyor is an individual whose job is to take a detailed look at all aspects of a property to determine its up-to-date market value.

They will look at the current property market and the condition of the home to determine its final valuation.



Tax-free means that the money you released through equity release won’t be taxed with income tax or capital gains tax. However, it may affect your overall tax position.

Title Deeds

A title deed in common law is any written legal instrument that transfers, affirms, or confirms an interest, right, or property and that is signed, attested, delivered, and/or sealed.

It is frequently linked to the transfer of property title.


Trustpilot is a popular public consumer review website where you can write about your experience with an equity release company, and browse other people’s reviews.


Up/Down Valuation

If your property is valued lower or higher than the estimated amount, it’s called an up or down valuation.

Depending on the amount you want to borrow and the max LTV the lender will give, it may change your possible release amount or interest rate.



A valuation is a final figure presented by a surveyor that’s representative of the current value of your property.

Variable Interest Rates

A variable interest rate is a debt instrument, such as a loan, bond, mortgage, or credit card, that does not have a fixed interest rate throughout the life of the loan.

These rates are usually based on a benchmark rate.


Waiver of Occupancy

This document can be signed by anyone older than 17 that permanently resides in the house and who isn’t party to the equity release scheme.

The document confirms that if the end of the plan’s condition is met, they’ll lose their right to stay in that house.

Then, the house can be sold by the provider to repay the loan.

Whole Market Financial Adviser

A whole market financial adviser has access to the entire equity release market, when helping you to decide on the best equity release plan for you and your family.

Got Questions? Check These First

What Does Equity Release Mean?

What's a Lifetime Mortgage?

What are Home Reversion Plans?

What Rates Do I Need To Pay For Equity Release?

In Conclusion

Equity release is a fantastic retirement product and now you have all the jargon, you can meet with a financial adviser with confidence.

You’re one step closer to unlocking the retirement of your dreams now that you know your equity release jargon.

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Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

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