What's Equity Release & How Does It Work?

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How Does Releasing Equity From Your Property Work?

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Over £4.8bn of property wealth was released in 2021, and 2022 appears to be another record-breaking year.

Now’s the time to access your share of this financial opportunity.

We’ll unlock:

  • The secret to using these products safely and correctly.
  • An introduction to how to release equity could change your life.
  • The types of equity release available in 2022.
  • 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?

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What Is Equity Release

What’s Equity Release?

Equity release is a product primarily implemented by financial institutions across the UK to help older homeowners access their property wealth.

How Does Equity Release Work?

Equity release works by your property acting as collateral against the loan amount, which can be received as a lump sum, in smaller lump sum payments, or as monthly payments.

With over 74% of UK retirees having property wealth¹, you may be in luck.

You can use the money tied into your home with equity release, and live peacefully in your precious space for the rest of your days.

Learn more about equity release:

Do I Meet the Qualification Criteria?

You could meet the equity release qualification criteria if you answer YES to the following questions:

  • Do you own a home in the UK?
  • Are you at least 55?
  • If you’re opting for a joint plan, are you both 55 or older?
  • Is your property worth more than 70,000 and in a reasonable condition?
  • Is the property your primary residence?
  • Have you paid off all or most of your existing mortgage?

Learn more about equity release qualification criteria:

Are There Different Types of Equity Release?

Yes, there are 2 types of equity release products, lifetime mortgages and home reversion schemes.

Lifetime mortgages are vastly more popular equity release plans, with a flexible range of products falling under this umbrella, including drawdown lifetime mortgages, lump sum plans, and enhanced lifetime mortgages.

The predecessor to the lifetime mortgage is the home reversion scheme. These products work by selling all or part of your home below market value², with a life-long tenancy granted to you, the homeowner.

Learn more about the types of equity release:

What's the Process?

The first step in the equity release process is contacting a trusted financial advisor specialising in equity release products.

Your advisor will assist you throughout the equity release application and implementation process, usually taking 4 to 8 weeks until completion.

Learn more about the equity release process:

Do I Need Advice?

Yes, you do need financial advice when unlocking the equity from your property.

Equity release is a massive financial decision that can’t be done without the guidance of a financial advisor.

We always suggest a whole of market advisor who can help you find the best equity release deal across all lenders.

Learn more about equity release advice:

What Does It Cost?

Equity release costs between £1,500 and £3,000, plus compound interest.

The exact cost breakdown will depend on the vendors you select, but your financial advisor will assist with a precise quote before the final confirmation.

The costs of the various equity release products include application fees, the surveyor’s valuation bill, advice fees, legal expenses, completion fees, and, of course, compound interest.

Learn more about the various equity release costs:

What Are the Uses?

Homeowners over 55 can use equity release in any way you wish, whether it’s to cover monthly expenses or indulge in a dream holiday.

Whatever your decision, spend under the guidance of a financial advisor, as you don’t want to be left with zero equity and no means to borrow.

Learn more about common equity release uses:

Is It Safe?

Yes, equity release is safe as it’s under the guidance of the Equity Release Council and regulated by the Financial Conduct Authority (FCA)³.

Both parties ensure that the industry remains safe and that clients receive fair treatment.

Learn more about unlocking equity safely:

Who Offers Equity Release

Equity release companies across the UK offer these products, including financial institutions, banks, mutual funds, and building societies.

For a legitimate product, always be sure to select a company that’s a member of the Equity Release Council.

Learn more about the top equity release providers:

Are There Companies to Avoid?

Yes, there are equity release companies to avoid in 2022.

Avoid the following companies at all costs:

  • Not a member of the Equity Release Council.
  • Doesn’t offer a ‘no negative equity guarantee’.
  • Offers variable interest rates with no cap.
  • Doesn’t allow you to pay back any of the loan or interest in your lifetime.
  • Provides an immediate loan online or in-person without reviewing your circumstances.

Learn more about how to avoid a negative equity release experience:

Where Can I Find the Best Deals?

You can find the best equity release deals by contacting a whole of market advisor.

Their role is first to confirm that equity release is right for you and then assess the market to find the best plan for your circumstances.

Learn more about finding the best equity release deals:

How Much Equity Can I Unlock?

The amount of equity you’ll have the opportunity to unlock will depend on your age, property value and, with an enhanced lifetime mortgage, your health condition.

You’ll usually qualify to access 20% to 60% of the market value of your property.

Try our equity release calculator to get an accurate estimate of the amount of cash you could be eligible to unlock

Alternative ways to determine the equity available in your home:

What Are My Alternatives?

Your alternatives to equity release include:

  • Downsizing
  • Using alternative credit
  • Remortgaging
  • Getting a part-time job
  • Retirement interest-only mortgages

Learn more about equity release alternatives:

10 Most Common Equity Release Questions

Is Equity Release Regulated?

Can I Still Take Out an Equity Release Plan if I Have an Outstanding Mortgage?

Will I Still Own My House With Equity Release?

How Will Releasing Equity Affect My Family?

Can I Still Leave an Inheritance with Equity Release?

Will My Entitlement to Means-Tested Benefits Be Affected?

Will I Lose My Home?

Can I Change My Equity Release Plan?

Can I Move Home With Equity Release?

Can You Pay Back Equity Release Early?

What Happens to My Equity Release Plan if I Enter Long-Term Care?

Final Thoughts

You’ve come to the right place if you think equity release could be the answer you’ve been looking for.

SovereignBoss continuously researches and curates the latest and most accurate equity release information to guide you through all aspects of the equity release journey. We’ve done the research, so you don’t need to.

Your dream portal awaits!

Before You Go...

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Value of Your Home?

50000

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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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HOW MUCH EQUITY CAN YOU RELEASE?

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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How Much Can You Release?

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