Equity Release FAQs

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Find answers to the most commonly asked questions about equity release in our blog here. If you can’t find the answer to your question below, or if you need any further information contact us.

What is equity release?

Equity release allows certain homeowners to access the equity (cash) tied up in their property.

What is the difference between equity release, a lifetime mortgage and home reversion?

Equity release is the generic term for accessing cash tied up in your home. There are two types of equity release, either a lifetime mortgage or a home reversion plan.

Lifetime mortgages are the most popular form of equity release. They are a form of mortgage that extends over your whole lifetime (not a fixed term like normal mortgages). In the past, there were no repayments with lifetime mortgages, with the loan and interest being repaid in full when your home is eventually sold (either when you die or go into full-time care). More recently, some lifetime mortgages allow repayments, enabling you to control the final balance that will be deducted from the eventual sale of your home.

With a home reversion plan you sell all or part of your property in return for a cash lump sum or a regular monthly income (or both). You receive a lifetime tenancy to remain in your property until you die or go into full-time care. There is usually no rent to pay and you carry on living in your home just like it is your own (you have to continue to maintain and insure it).

Is equity release right for me?

While equity release schemes can be a sensible and practical solution for financing lifestyle, home improvements, education or general income, it’s not the right solution for everybody. It can impact the amount of inheritance you leave for your family. It is a big step so it is important to seek expert advice.

However, if you are cash poor, but asset rich (with lots of money tied up in your home), equity release could be a good way for you to get your hands on some of your cash.

When can I get equity release?

You can only get equity release if you own your own home and you are over the age of 55 for lifetime mortgages and over 60 for home reversion plans.

How much equity release can I borrow?

The maximum percentage you can usually borrow is 60 per cent of the value of your property. How much you can take out will also depend on your age, the value of your property and if you have any past or present medical conditions, in which case some providers will offer larger sums.

What can I use equity release for?

You can use the cash you release from your property through an equity release scheme in virtually any way you want. The most common uses of equity release are:

  • To repay an interest only mortgage left on the property or enable affordability of switching to capital repayments
  • To fund the education of children or grandchildren
  • Home improvements
  • New car
  • Family holidays
  • Improved lifestyle
  • Increased monthly income

How is equity release paid back?

Equity release is paid back from the sale of your property when either:

  • the borrower dies (or on death of the second borrower if a joint lifetime mortgage)
  • the borrower moves into permanent long-term care (or the second borrower moves into long term care if a joint lifetime mortgage)

Can equity release be used to pay for care?

If you are over 60 and a homeowner you can take out a lifetime mortgage on your existing property to pay for long-term care. For a home reversion plan you will need to be over 65 and own your own home. In all cases it is important to seek specialist financial advice to ascertain what is involved, and the options and alternatives available to you. Equity release may affect the benefits you are entitled to.

Should I speak to my family about equity release?

Equity release is a big decision and could have ramifications for future generations down the line, so it is a good idea to talk openly with family about your financial decisions.

Do I need financial advice?

Yes. To take out any type of equity release, you must speak to a suitably qualified financial adviser. John Whyte is a fully qualified and accredited independent financial adviser who specialises in equity release. Call now for a free, no obligation chat.