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Equity release

If you are in, or approaching, retirement and can identify with the phrase 'property rich, cash poor', you may be considering some kind of equity release scheme to access your wealth.

What is Equity?

'Equity' is the term given to what your home is worth after allowing for debts such as mortgage loans that have been secured on it.

As a homeowner, you will have invested a lot of time and money into making it the home of your dreams. You may find your retirement income is not enough to see you through the rest of your years, yet you have your heart set on staying in your home for the rest of your life. Equity release lets you release some of the money you have in your home, without having to move, which you can use towards a more comfortable retirement. The equity you release from your property is already yours so there is no tax to pay on any money taken. Most importantly, you still have the right to remain in your property for the rest of your life, or until you want to move out.

How much can you release?

How much cash you can release depends on how old you are, how much your home is worth and if there are any outstanding loans on the property. There are limits to how much you can raise through equity release - and the older you are, the more cash you can release from your home. Use our Equity Release Calculator to find out how much you could release.

Types of Equity Release Schemes

• The Home Equity Release Mortgage (HERM):

  Also known as a lifetime mortgage, this is a range of mortgage products that are designed for borrowers to release some of the equity in their property, on the basis that the interest charged is "rolled-up", and the borrowers never have to make monthly mortgage repayments. The minimum age of the youngest borrower must usually be 55, and the older the borrower, the higher the portion the homeowners may borrow. This tends to be in the region of 15% of the property value at age 55, rising to a maximum of 55% at age 85.
  
  Borrowers may receive their equity release either as a lump sum, or as a monthly drawdown in order to supplement their pension income, or a combination of both if you require an additional regular income as well as a cash lump sum.
  
  

• Home Reversion Plans:

  Home Reversion schemes operate quite differently to the Lifetime Mortgage. Here the homeowner sells their home at a substantial discount of its value. By doing so they give up ownership, and therefore the right to any future increase in the property value. Generally most providers of Home Reversionary schemes require the borrowers to be at least 70.