Equity Release Jargon in Oct 2021

Know Your Equity Release Jargon as Confusion Will Cost

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.

Before You Start Reading....


Equity Release Calculator

Value of Your Home?


Drag me

100% Secure & Fast. Takes Just 8 Seconds.


It's VERY FAST, takes just 8 seconds

Equity Release Jargon Terms: Confusion Could Cost You a Fortune

Equity release isn’t a tricky concept if you know the right terminology. There are so many terms that recurringly pop up, but what do they mean?

No need to worry! We’ve compiled a list of the most important Equity Release jargon to define and clarify unfamiliar terms.

What Are the Terms Used in Equity Release & What Do They Mean?



Advisers are there to meet you and provide support to your queries as they come up. They will 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 rates 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 APR1 is low, the deal is better for you.



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


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

Try It: Find Out How Much Home Equity You Can Release

Compound Interest Or Roll-Up Interest

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

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 solicitors2 give their clients from 3rd parties. They’re added to basic fee charges.

Discretionary Income

This refers to the cash leftover from your income after paying for life essentials, like bills, groceries, and travelling.

First: Find Out How the Equity Release Loan Application Works in the UK

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 3-lifetime mortgages is a drawdown plan. A drawdown plan lets homeowners access a large amount of cash to be drawn from when needed.


This is when you opt to sell your home and buy a smaller one or one of less value. That way, you can release some extra cash.

Early Repayment Charges

You have the option to repay your equity release loan at any time. But, if you do so, you might be fined for it. You’ll have to pay additional charges that can be up to 25% of the initial loan amount. 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 mortgage3 on the property. In other words, it’s the amount of cash tied into an asset after any debt that is owed.

Equity Release Council

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.

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 everything 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 Authority4, which is an independent body regulating financial services. This includes equity release plans that are run ethically.

Fixed Interest Rates

These are interest rates that are set and do not fluctuate5. For example, with a lifetime mortgage, you will get a standard interest rate (let’s say 4%) and this rate will be in place for the rest of your 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.

house 7


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 an 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 sum6. The income is only payable for a limited time and then it’ll stop, depending on the amount of equity you unlock. 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 inheritance tax is charged on an estate when the homeowner dies when all the assets are given to their heirs.

Inheritance Protection

Inheritance protection is a feature that comes with some lifetime loans. It allows 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 it.

Joint Borrower

Equity release schemes run until the loan is repaid or until the last borrower needs permanent long-term care or passes away. So, having a joint equity release plan means that your spouse or partner won’t have to move if they outlive you, or if 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 owned 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 value 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 don’t exceed the limit. So, if you want to know who is and isn’t able to support themselves in this way, the UK government will look at their means.

No-Negative-Equity Guarantee

This guarantee comes with most equity release lifetime mortgage plans out there. This guarantee protects you from owing more than what your house is worth. It’s set by the Equity Release Council.

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.

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 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 accrue interest at a different interest rate to your initial 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 finance it. These providers can often be sourced through your financial adviser as they know your circumstances 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. It’s essential to keep in mind that the new property might be of a lower or higher value, so you might have to repay part of your existing plan.

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. 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 give you guidance when looking into your mortgage options. Their objective and field of knowledge is equity release.

Rate Compounds

Some lifetime mortgages have this as an extra feature. This is additional interest on 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 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.

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. Always read the T&Cs.

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 gives 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 public consumer review website. You can review your 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 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 and repay the loan.

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

After reading this article, you’re geared up to face any uncertainty that comes your way. Equity release doesn’t have to be complicated. If you know these terms and understand the conditions, you can ensure that the plan you agree to is the one that’s best for you.

Are you considering equity release but are still unsure? Perhaps check out the pros and cons next!

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.

Contributors: Nicola Date, Katherine Read
Reviewed by Francis Hui

questions 2

You may also like


Most people are using equity release as a means of retaining the use of their house while also obtaining a lump sum or a steady stream of income. Get matched with an expert and check your eligibility for equity release options.

Use our free equity release calculator & see how much you can release today.

How Much Can You Release?

Use the FREE Calculator Below 👇


Equity Release Calculator

Value of Your Home?


Drag me

100% Secure & Fast. Takes Just 8 Seconds.

As Featured In
yahoofinance marketwatch
rachel w

Written by
Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
john lawson profile.jpg

Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.

Written by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
kath icon

Written by
Katherine Read
Financial Planning Reporter

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.

Written by
Nicola Date
Writer & Financial Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

See How Much You Can Release 👇

Use the QUICK form below.


Equity Release Calculator

Value of Your Home?


Drag me

100% Secure & Fast. Takes Just 8 Seconds.

As Featured In
yahoofinance marketwatch