Equity Release Explained

Equity release is a way of releasing the wealth tied up in your property without having to sell it and move to another home. You can either borrow against the value of your home or sell all or part of it in exchange for a lump sum or a regular monthly income.

Learn More: What Is Equity Release?

In as much as equity release plans offer you several benefits (like financial freedom), they have numerous drawbacks. Some of these include:

• You’ll leave behind a reduced inheritance
• There’s ‘rolled up’ interest on the lifetime mortgage plan
• There are limits to the amount you can release
• It may affect your state-entitled benefits
• You’ll miss out on increasing estate values

Learn More: Pitfalls of Equity Release

Equity release means retaining the ownership of your home while also unlocking the equity tied into your home. The ‘catch’ with equity release plans is that you repay the capital you released plus the interest accrued when you pass on or move into permanent care.

Learn More: What Are the Pros & Cons?

The amount of equity you can unlock ranges from about 20% to 50% of your estate’s value. Nonetheless, this depends on:

• The age of the youngest borrower
• Your estate’s market value
• Your medical condition

Typically, the older you are, or if you have any pre-existing conditions like blood pressure, the more equity you can release.

Learn More: Equity Release Advice

Whether you qualify for equity release is based on the age of the youngest person on the Title Deed & your property. Lifetime mortgages, for example, will require you to be at least 55, whereas with a home reversion plan, you’ll have to be at least 65. You must also:

• own your home,
• or have it on a freehold basis,
• it also helps if your residence is in good condition.

It’s also vital to keep in mind that the lowest property value accepted by the equity release sector is £70,000.