What Is Equity Release & How Does Equity Release Work in Oct 2021?

What's an Equity Release Mortgage & How Does Releasing Equity From Your Property Work?

Do You Want to Learn More About Releasing Equity from Your Home? Get EXPERT Equity Release Advice & Get Equity Release Explained Simply.

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What’s Equity Release & How Does It Work? The ULTIMATE Guide

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Don’t miss out on a golden retirement opportunity!

Retirement is around the corner. If you don’t act now, you could find yourself in a situation where you’re left strapped for cash, with nowhere to turn. Now’s the time to access your share of the £2m already released in 2021.

We’ll unlock:

  • The secret to using an equity release mortgage safely and correctly.
  • An introduction to equity release and how it could change your life.
  • The types of equity release available in Oct 2021.
  • A comprehensive guide on how equity release works.

With more than 10 expert consultations and many hours spent engrossed in researching over 220 plans, we’re in the ideal position to help you figure this out.

Perhaps an equity release mortgage could be the solution you’ve been looking for?

Continue reading to find out more NOW!

Before you continue reading, check out this quick video that sums up the most important information about equity release:

What Is Equity Release?

Equity Release is a type of mortgage that allows older homeowners to borrow money against the value of their estate.

If you’re 55 or older and own a home in the UK, you might qualify for an equity release mortgage.

How Does Equity Release Work?

An equity release mortgage is, in a nutshell, a loan plus interest that is paid back to the lender when the homeowner passes away or goes into permanent care. The homeowner’s family usually pays back the cash released, and the interest incurred, from the sale of the home in question.

Equity release is available for individuals or couples over 55, with the youngest homeowner’s age determining the amount of equity that can be released. It is important to note that some equity release schemes may require the homeowner to be 60 or older.

The money you release can be taken as a lump sum, paid out in several smaller sums (or a combination of the 2), or the form of a monthly salary.

how does equity release work with a home reversion scheme

Equity Release Options

Equity Release vs. Lifetime Mortgages

There are 2 main types of equity release in Oct 2021, a lifetime mortgage and a home reversion plan. It’s essential to understand the details of both plans to decide which works best for you.

Lifetime Mortgage

lifetime mortgage is the most common form of equity release, which allows you to secure the loan against your primary residence. A lifetime mortgage is tailored to run for your lifetime, during which the house remains 100% yours, and therefore stays in your name.

Unlike traditional residential mortgages, it has no payment requirements, and you can continue living in your home. The money you release (plus interest) is repaid when you die or if you relocate to long-term care.

If there’s any cash left after the loan has been settled, it goes to your estate and can be distributed as outlined in your will.

Home Reversion

home reversion plan is another option that you can consider. You raise money by selling all or part of your home while continuing to live in it until you die or move into permanent residential care.

How to Avoid Selling Your House to Pay for Care

Growing older can be scary and too many people find themselves in a situation where they don’t have the means to pay for caregivers to assist them through life in old age.

Often, retirees are forced into a situation where they need to sell their beloved family home to pay for much-needed care.

This is where equity release can help you.

You can stay in your home and use the cash you release to pay for in-house care. This way, you can get the support you need, while being able to maintain the familiarity that you love so much. It’s truly a win-win situation.

Equity Release Uses

Do the Funds Released Need to be Used For a Particular Purpose?

The short answer is no!

You can use the equity released for any purpose you wish to. However, if you have an existing mortgage, you will need to use some of the equity to pay that off first.

From there, the decision is all yours!

A lump sum of cash can be used to go on a dream holiday or secure your family’s inheritance. Smaller monthly payments are suitable if you are looking for a way to cover your living costs.

Need inspiration? Check Out: 12 MOST COMMON Uses of Home Equity Release

how does equity release get repaid

Equity Release Criteria

When Are You Eligible for Equity Release in Oct 2021?

To be eligible for equity release, you need to meet the following equity release criteria:

  • You must be at least 55+. In some cases, the plan might require you to be 60 or 65.
  • If there are 2 or more homeowners, the youngest needs to be 55 or older.
  • You need to own your home.
  • You should have no or only a small mortgage left on your property.
  • Your property must be located in the UK.

Equity Release Alternatives

Do You Have Other Choices Besides Equity Release?

If you’re not keen to release the equity from your home, there are alternatives to equity release to aid in unlocking a stress-free retirement. While these may take a little work, they could end up highly profitable in the long run.

Perhaps consider downsizing and pocketing the balance, renting out a room, or even investing in a business? We recommend that you get in touch with a financial adviser who can guide you on your retirement journey.

While financial advice can be costly, it will only provide benefits for you and your family in the long run!

But wait, there’s another option you should be aware of!

With the current economic challenges and changes, more and more providers will allow you to make voluntary repayments to control the mortgage balance if needed.

There are several flexible options, and they offer you the ability to:

  • Pay monthly or ad hoc to help you control your mortgage balance.
  • Protect a percentage of your estate with an Inheritance Protection Guarantee.
  • Make tax-free equity withdrawals on a drawdown basis, following the establishment of an initial cash reserve facility.
  • Have downsizing protection and compassionate early repayment. Both of these can assist in negating the need for early repayment charges.
  • Borrow more or offer a lower interest based on one’s health and lifestyle conditions.
what are the different types of equity release products

Is Equity Release Safe?

Will I Be Protected When Unlocking Equity In Oct 2021?

The short answer is yes!

The Equity Release Council (ERC) regulates the industry to ensure that consumers are protected.

Before their formation in 1991, the industry was fraught with dubious lenders. However, today’s picture is vastly different.

The council has implemented rules to ensure that all their members offer fair deals that won’t negatively impact clients. You’ll be protected, as long as you use your equity release funds responsibly.

Some of the ERC’s regulations include:

  • ‘No negative equity guarantee’ – This means that when you die or move into permanent care, your family will never have to pay more than the sale value of your home, even if property prices plummet.
  • Stay at home – You have the right to remain living in your home until you pass away.
  • Clear offers – A legitimate lender will give you a clear and concise offer, providing detailed information on all the costs involved and how changes in your property value might affect your plan.
  • Select your representative – Your preferred representative will steer all the legal work. You and your solicitor will sign a certificate stating that your plan has been explained and that you understand all the risks involved.
  • You can move home – You can transfer your equity release plan to a new home, as long as it meets your provider’s criteria.
  • Equity release certificate – This is required to define the cost to your asset and estate.
can i stay in my home with equity release

Equity Release Companies

Equity Release Companies to Consider vs. Those to Avoid

When unlocking equity from your home, it’s vital to be aware of the best equity release companies on the market. Here are some tips on how to spot the top providers on the market, and those that you should steer away from.

The Best Equity Release Companies

To recognise the best equity release companies in Oct 2021, you should look out for the following:

  • They must be a member of the Equity Release Council.
  • They must be upfront about all the terms and conditions of your plan.
  • The company must offer a ‘no negative equity guarantee.’
  • They should offer low early repayment charges.
  • Look out for no early repayment charges if you move, and your new property is worth less than your old one.
  • Finally, look for flexibility, meaning you can take the loan with you to another property.

At your fingertips: Quickly Compare 200+ Equity Release Quotes!

Equity Release Companies to Avoid

On the other hand, there are clear indicators of which equity release companies to avoid. These include:

Using a dubious lender for equity release could ruin your life and leave you drowning in debt. Rather stick to one of the top providers that are available in the industry.

Equity Release Advice

How to Find the Best Equity Release Advice in Oct 2021

It’s essential to find the best financial adviser to help you along this journey. They will be available to answer all your questions, guide you on the process, and help you find the perfect plan to suit your needs.

You can find a financial adviser by:

  • Searching for available professionals around you on Google.
  • Searching on the Equity Release Council’s website.
  • Looking at your local media outlets and notice boards.
  • Asking friends and family members for personal referrals.
  • Via searches on social media channels.

Pro Tip: Look for someone who specialises in equity release.

It’s acceptable to meet with a few advisers until you find the right one. You must trust the person you work with, as they’ll be guiding you through your money-based decisions.

Advisers will differ according to experience, education and specialities. However, all advisers fit into 2 categories:

  • Some are ‘whole of market’ advisers. They have access to all products and plans available on the market and will find the best option for your home.
  • The other type, ‘restricted advisers’, work with limited providers and plans, ones that suit most of their clients. They will recommend you a suitable plan based on one of these.

It is advisable to look for a whole market adviser as they have a broader, holistic range of providers and plans to choose from.

In addition, you get  Mortgage Only Advisers and Independent Financial Advisers (aka IFA’s); both can advise on equity release plans.

How Much Can You Get When Releasing Equity From Your Home?

Are You Wondering How Much Cash Could Be Tied Into Your Home?

The amount of equity that you can release depends on:

  • Your and your partner’s age.
  • The condition of your health.
  • The value of your property.

Your property will be required to undergo a detailed and up-to-date valuation, to determine its value and condition.

Pros & Cons

Discover the Advantages & Disadvantages of an Equity Release Mortgage

Like with all financial products, there are pros and cons of equity release that you must consider before selecting a plan. With that, here are the 11 advantages and disadvantages of equity release:

7 Advantages of Equity Release

  • The cash you release is tax-free.
  • You can remain in your home until you pass away or move into long-term care.
  • You can use the cash you release in any way you wish.
  • Interest rates are at an all-time low.
  • You don’t have to make any repayments in your lifetime.
  • The Equity Release Council ensures that you can’t go into negative equity.
  • You can protect a percentage of your home to go to your heirs for when you pass away.

4 Disadvantages of Equity Release

  • There are costs involved with equity release.
  • Unlocking equity will reduce your inheritance.
  • It could make remortgaging your home difficult.
  • It may affect your state benefits.
how does an equity release calculator work

Fees Involved

What Are the Costs Involved in an Equity Release Plan?

There are costs involved with equity release, which include:

  • Advice Fees – You’ll need to hire a financial adviser who’ll guide you throughout the equity release process.
  • Application Fees – With most equity release lenders, you’ll need to pay an application fee. These funds can be settled with some of the money you unlock.
  • Surveyor’s Fees – During the equity release process, you will need to have a surveyor give your home a detailed valuation.
  • Solicitor’s Fees – With all equity release loans, you’ll need a solicitor as a part of the process. They’ll take care of all the legal aspects of equity release.

The cost of equity release advice will differ from one lender to the next. You can usually pay anything from £900 to about £2000. When shopping around for an adviser, and you have narrowed it down to 2, perhaps add cost to your consideration. Otherwise, the best advice is worth the investment.

All in all, unlocking equity will set you back anything from £15,000 to £3,000. It’s wise not to stint on costs as you’re dealing with important financial decisions.

Interest Rates

Equity Release Interest Rates Are at an All-Time Low In Oct 2021

In the past, equity release interest rates were vastly higher than those of traditional mortgages. You could achieve rates of up to 6%.

However, these days, things are hugely different. With an increase in competition, as more lenders pop up on the market, you’re bound to find an excellent deal to suit your needs.


Interest rates are currently at an all-time low. As things stand, equity release has never been cheaper. In fact, interest rates are currently competitive with those of traditional mortgages.

You can expect to pay under 4% on your equity release plan, with an average of 3.2%. In addition, rates as low as 2.3% have been achieved, which is usually in the case of an enhanced lifetime mortgage.

Your Family & Equity Release

Will Equity Release Impact Your Spouse & Children?

Equity release will impact your family. Therefore, it would be wise to discuss your plans with your children and spouse, to ensure everyone is on the same page. Let’s take a look at how it could affect your partner and children:

Your Partner/Spouse

When you unlock equity from your home, you can either do so individually or with your partner. Some lenders may require you to opt for a joint equity release.

It’s essential to consider this option for the future of you and your spouse. If your spouse unlocks equity and then dies, you’ll have to settle the loan amount if you want to stay in the home. The same will happen to your spouse if you take out an individual plan.

If equity release is in both your names, the home will only be sold once you both pass away or move into permanent care.

Your Children

If you opt for an equity release plan, you can expect to give your heirs a reduced inheritance. You’re essentially using the money in your home, instead of leaving them an asset.

However, if you have additional assets, then you could still leave something to your kids.

Additionally, you can opt for inheritance protection which will section off a portion of your estate to be left to your beneficiaries.

Equity Release Calculator Explained

Discover the Maximum You Can Unlock With Our Free Equity Release Calculator

Using our equity release calculator is a simple, stress-free process. All you need to do is give the estimated value of your home. You’ll then need to provide a few personal details.

The whole process takes 8 seconds!

From there, you’ll receive an estimate of the maximum amount of equity that you could be eligible to unlock.

Note that your true estimate will be based on an up-to-date home valuation.

Additionally, we’re offering a rare treat.

By using our calculator, you’ll get a FREE telephone consultation with an adviser from Age Partnership, one of the UK’s top equity release companies.

Our Equity Release Infographic

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Got Questions? Check These First

What Are the Pitfalls of Equity Release?

What's the Catch With Equity Release?

Is Releasing Equity a Good Idea?

How Much Interest Will I Pay on Equity Release?

Where Will I Live With Equity Release?

How Do I Find an Independent Financial Adviser?

Should I Go for an Independent Adviser or a Direct Provider?

What Do I Do If I Get Bad Advice From My Adviser?

What Does Equity Release Mean?

Is Equity Release a Mortgage?

Is Equity Release a Con?

In Conclusion

While unlocking equity from your home might seem the perfect answer for you, it is essential to weigh up all the pros and cons and look at the equity release alternatives available in Oct 2021 before making your final decision.

If your pension and other businesses cannot help you maintain or improve your lifestyle, then equity release is an excellent option for you, and worth any risks involved. As long as you own your home and are over the age of 55, there is a good chance there will be an equity release scheme available for you.

There are no limitations on how you can use the money and you will not have to worry about making repayments or losing your home.

Contact your financial adviser today to find the best equity release plan for you!

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
Edited by Rachel Wait
Reviewed by Francis Hui

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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.

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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.
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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.
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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.

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