Equity release is secured on your home. It can affect inheritance, tax position and entitlement to means-tested benefits. Obtain advice from a suitably qualified, FCA-authorised equity release adviser and consider independent legal advice.
The two types of equity release
Lifetime mortgage
A loan secured on the home. Some plans allow interest payments or voluntary repayments; otherwise interest can be added to the balance. The loan is normally repaid when the last borrower dies or moves permanently into long-term care and the property is sold.
Home reversion plan
You sell all or part of the home to a provider in return for money and a right to remain under the plan terms. The amount paid is normally below the market value of the share sold. You no longer benefit from future growth on that share.
Why roll-up interest changes the cost
When interest is added rather than paid, later interest is charged on the original borrowing and accumulated interest. The balance can therefore grow faster over a long period. A personalised illustration should show the effect under the product's assumptions, including fees and the impact of any optional repayments.
Do not compare lifetime mortgages using headline rate alone. Check the annual equivalent rate, fixed or variable terms, advice and arrangement fees, early repayment charges, drawdown rules, portability and what happens if another occupier remains in the home.
Questions to ask an equity release adviser
- How much is needed now?
Compare a single advance with drawing smaller amounts later.
- What will the balance become?
Review illustrations at different future dates and after fees.
- Can repayments be made?
Check allowances, restrictions and early repayment charges.
- What protections apply?
Check tenure, moving-home terms and any no-negative-equity guarantee.
- Who else is affected?
Discuss a spouse, partner, dependant or other occupier who is not a borrower.
- What benefits could change?
Releasing cash can change means-tested benefit entitlement.
Alternatives to compare
- Downsizing
- Selling and moving can release equity without secured borrowing, but include moving, legal and property-purchase costs.
- Retirement interest-only mortgage
- Monthly interest is normally paid and affordability is assessed from retirement income. Capital remains outstanding until a specified event.
- Standard or later-life mortgage
- A repayment or interest-only route may be available depending on income, term, age and repayment strategy.
- Savings, pension or family support
- Using other resources can affect tax, retirement security and estate planning, so take relevant professional advice.
- Benefits and grants
- Check entitlement and local support before reducing home equity or taking a secured loan.
How much can be released?
Providers use the youngest applicant's age, property value and acceptability, health information, plan features and their own maximum LTV. There is no reliable universal percentage. An enhanced plan may offer different terms after medical and lifestyle information, but disclosure must be accurate.
Authoritative guidance
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