Equity release is available for homeowners aged 55 and above to release equity from their homes to finance any number of things in their lives. You can use equity release to give your children a house deposit of their own, you can use it to fund your retirement, or to make improvements to your home.

If you want to know more, we’ve covered everything you need to know about equity release, including who can qualify, its pros and cons, and how to use it in our what is an equity release mortgage guide, so be sure to check it out.

What is equity?

Equity is the difference between the market value of your home and how much mortgage you have left. If you’ve mostly paid off your original mortgage, and your home has increased significantly in value since you bought it, then you have a lot of equity that you can draw from.

Types of equity release

There are two main types of equity release mortgage. The first is a lifetime mortgage equity release agreement, and the second is a home reversion plan.

·         Lifetime mortgage

An equity release lifetime mortgage means that the amount you take out, and the interest on top of it, is paid off at the end of your life or when you’re moved into long-term care and your home is sold. There are some interest-only equity release mortgage options if you prefer to pay the interest as you go.

·         Home reversion plan

Alternatively, you can sell a portion of your home to a reversion company. You can sell 25% of your property, for example. When the property is sold, you will only receive the portion of it that you own. If you own 75% of your home, then you’ll get 75% of the property price.

How can I release equity from my home?

Releasing equity from a mortgage can be done in two ways:

Lump sum: This is the most common type of equity release mortgage for passing on a living inheritance or paying for home repair. You get a single lump sum from your equity release mortgage.

Drawdown: With drawdown, you get an upfront sum and can then draw from a larger fund as you wish when you need it. You only start collecting interest when you take the funds out.

• With mortgage release equity, you:
  • Get access to a large sum of cash when you need it
  • Don’t need to make monthly repayments
  • Can continue to live in your home for the rest of your life.

• Of course, there are also cons to releasing equity:
  • You leave a smaller inheritance for your loved ones
  • Interest builds up and can accumulate quickly
  • Equity release may impact your means-tested benefits

  Before you take out equity, talk to one of our advisors. We’ll help you understand exactly what you’re agreeing to to ensure it’s a good fit for you.