Equity Release Jargon

Are You Confused With All the Equity Release Terms?

Equity release 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 nicely put-together list of helpful jargon to define and clarify unfamiliar terms used in the equity release process.

In this Article

Are You Confused With All the Equity Release Terms?

Equity release 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 nicely put-together list of helpful jargon to define and clarify unfamiliar terms used in the equity release process.


Advisers are there to visit you when it suits you so that they can review your situation and give advice on the best steps to take that’ll benefit your finances and future. They’re friendly, working professionals trained and qualified in everything related to equity release.

AER (Annual Equivalent Rate)

This shows you the yearly interest rate on any savings or investments. If the AER is high, it means a better return. 


It’s a determined amount of cash paid yearly between parties, like a mortgage or a pension.

Arrangement Fee

Cash is paid to the lender or lending provider, like an administration fee used to produce various equity release costs.

APR (Annual Percentage Rate)

It’s the overall cost for borrowing on credit or with a loan. If the APR is low, the deal I better for you.


The person the estate is left for. This happens in the event of death, and as stated in their will.


Calculator can let a customer know exactly how much equity they may be able to release from their property.

Compound Interest Or Roll-Up Of Interest

Interest owed gets added to the loan total. Meaning you’ll have to pay interest on interest. Annually, the amount will increase.

CPI (Consumer Price Index)

This measures price level changes of a selected sample of everyday services and items. Lenders and providers look at these changes and then determine interest rates on equity release plans.


These are charges solicitors give their clients from 3rd parties. They’re added to basic fee charges.

Discretionary Income

This refers to the cash you left from your income after paying for life essentials, like bills, groceries, and traveling.

Disposable Income

Money left over after tax deductions have been made. Both are important to an equity release adviser because low incomes are one of many reasons people choose Lifetime Mortgages.

Drawdown Lifetime Mortgage

One out of three Lifetime Mortgages is drawdown plans. A Drawdown plan lets homeowners access a large amount of cash to be drawn from when needed.


People sometimes choose to sell their homes and buy a smaller one or one of less value. That way, you can release some extra cash.

Early Repayment Charge

You have the option to repay your loan at any time. But, if you do so, you might be fined for it. You’ll have to pay additional charges. Usually, these charges are defined or gilt based.

Defined charges mean that the percentage charged applied annually will be set out and will decrease over time.

If they are ‘defined’ charges, the percentage charge which applies each year will be set out and will typically reduce over time. However, in some instances, you won’t have to pay a fine. It all depends on the plan you have.

Enhanced Plans

These are types of lifetime mortgages with enhanced loan-to-values or otherwise preferential interest rates. Qualifying health conditions and lifestyle choices can make you get this type of loan.


This refers to the portion of your house not taking into account any mortgage on the property.

Equity Release Council

This is a protecting industry body. They’re responsible for ensuring members act with integrity and transparency towards their customers – the borrowers.

Equity Release

This is a way you can gain access to any cash locked up in your home. You can use this money to help you in your retirement, for example. There are two types: lifetime mortgages and home reversion plans.


This refers to anything you own at your death after your debt is repaid. Equity release decreases your estate.

FCA (Financial Conduct Authority)

Otherwise known as the Financial Conduct Authority, which is an independent body regulating financial services. This includes equity release plans that are run ethically.

Fixed Interest Rates

If you take fixed interest rates concerning equity release, they’re fixed for life/for the loan term. This is great for financial planning and money-saving in the long-term.


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 when it comes to equity release.


It’s a property where the resident is the owner of the land, home and all surrounding areas like gardens or garages. The property must be freehold or leasehold to qualify for release equity.

Home Reversion Plan

A form of equity release where a homeowner can sell a portion of their house in return for a cash lump sum or a regular income. 

Impaired Life

This is another term used for Enhanced Lifetime Mortgage. Impaired Life loans are given when a homeowner’s life choices or poor health circumstances result in a considerably large lump-sum.


A way of receiving money. Some equity release providers will give you your money in the form of an income and not as a lump-sum. The income is only payable for a limited time. Then it’ll stop. It’s worth getting some advice on this matter. Lump-sums can also be used as a source of income in retirement.

Inheritance Tax (IHT)

The tax charged on an estate when the homeowner dies because all the assets are given to their heirs.

Inheritance Protection

This is a feature that comes with some lifetime loans, allowing you to ring-fence a portion of your property’s value as a guaranteed inheritance for your heirs.

Interest-Only mortgages

This type of mortgage lets the borrower only pay the interest on the capital they borrowed.

Joint Policy Holder

If the property owner on a lifetime mortgage plan passes away, the joint policyholder won’t be kicked out of their home. They can stay in their home.

Joint Borrower

Equity release schemes run until the loan is repaid or the last borrower needs permanent long-term care or passes away. So, having a joint equity release plan means that your spouse or partner wouldn’t have to move if they live and you don’t, or when you have to move into permanent long-term care.

KFI (Key Facts Illustration)

This illustration is a document the lender provides. It breaks the terms and conditions of your plan down so you can understand them better. All providers must give a KFI in the same format so that when you are looking at two KPIs, you can compare them easily.


If the ownership of a house is according to a set period, after which that ownership is given back to the landlord (sometimes this is also known as “freeholder”)

Lifetime Mortgage

This is a type of equity release where you borrow a portion of your house’s value. This is secured against your property.

LTV (Loan to Value)

Loan to value1 refers to the portion or percentage of your house value that you’re borrowing. So, if you borrow £30,000 against your home and its value is £100,000, the LTV would be 30%, for example.


When we look at most equity release schemes, they’ll let you withdraw money as one lump-sum cash amount. This is in contrast with taking out smaller amounts more regularly.

Means-Tested Benefits

The government offers some benefits to those who show that their income and capital doesn’t exceed the limit. So, if you want to know who are and aren’t able to support themselves in this way, the UK government will look at their means.

No-Negative-Equity Guarantee

This guarantee2 comes with most equity release lifetime mortgage plans out there. This guarantee protects you from owning more than what your house is worth.

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.

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 you draw down from your reserve facility. These rates can 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 then accrue interest at a different interest rate than when you initially released funds. So, drawdown customers need to be aware of these rates!


Your provider is the company you choose to give you an equity release plan and finances it. These providers can often be sourced through your financial adviser, as they know your circumstances the best.


Some providers only have portable plans. These plans are handy when you want to move to a new home that meets the provider’s criteria and requirements. If that’s the case, the provider will simply move your mortgage over to the new house. The plan is secured against a new property, so you’re not stuck. However, it’s essential to keep in mind that the new property might be of less or higher value, so you might have to repay part of your existing plan.

Property Survey (Valuation)

Once the provider received your equity release plan application, they’ll send someone to coma valuate or survey the property. This makes sure that the value of your home estimate is accurate, and then the amount of money you can release will be in line with the LTV you agreed on. Independent and unbiased surveyors perform this evaluation, so you can rest assured they’ll be professional and trustworthy.

Qualified Equity Release Adviser

These advisers are specifically qualified to advise on equity release. Their main objective and field of knowledge is equity release specifically, not just broad financial knowledge.

Rate Compounds

Some lifetime mortgages have this as an extra feature or addition. This is the addition of interest to the money you borrowed and any accumulated interest. When the interest rate compounds every month, it refers to the frequency of interest being capitalised. However, interest doesn’t necessarily compound every month. Sometimes it only happens a few times per year (quarterly, weekly, daily etc.)

Retentions & Undertakings

The surveyor can identify what they consider as essential works 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 stipulated that any work done on the property must be done by a specific time.

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 need permanent medical 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. the T&Cs are always good to read.

Roll-Up Lifetime Mortgage

This is another type of equity release plan. Unlike a drawdown plan, the property owner will get the borrowed money as a lump sum instead of a smaller amount whenever it’s needed.

Secured Loan

Secured loans are secured by the provider against an asset you own, like your house, enabling the lender or provider to recover unpaid debts if you can’t repay them.


A solicitor is a professionally trained and qualified person who’s qualified to give legal support and advice.


A lender needs to survey the house or property to determine its exact value so that they can offer you the right loan.


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.


Trustpilot is a website with public consumer reviews of customers. They can review their experience with equity release businesses and companies.

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.

Variable Rate Plans

These plans usually offer a lower interest rate initially, but they have variable rates from year to year. It’s based on market condition changes.

Waiver of Occupancy

This document can be signed by anyone older than 17 that permanently resides in that 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 and repay the loan.

Common Questions

What Does Equity Release Mean?
What is a Lifetime Mortgage?
What are Home Reversion Plans?
What Rates Do I Need To Pay For Equity Release?

In Conclusion

After reading this article, you’re geared up to face any uncertainty that comes your way. Equity release doesn’t have to be complicated.

However, if you have any further questions, please don’t hesitate to contact us. We’re here to help you every step of the way.

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