Equity Release

Releasing cash from the value of your home, to support your later years

As you approach retirement, you’ll probably have built up a healthy pension pot to provide an income when you finish working. But while the investments you’ve held over the long-term will hopefully buy you a comfortable lifestyle in your later years, you may want to use cash tied up in the value of your home, to fund more immediate financial goals. 

Equity release is a term used to describe a range of products that allow you to release cash from your property, which you can access from the age 55. The cash you receive is tax-free, and the loan is repaid on the sale of your home either when you die or move into long-term care. People typically use equity release to fund things like home improvements, holidays, or loan repayments.

How does equity release work?

You can take the cash generated by equity release as one lump sum, as a series of smaller payments, or a combination of the two. There are two main types of equity release: Lifetime Mortgage and Home Reversion. 

A Lifetime Mortgage is a loan that can be taken out against the value of your property (as long as it’s where you live most of the time). Rather than making repayments, the interest charged on the loan is usually repaid after you die or when you move into long term care. Until that time, you remain a homeowner and can continue living in the property.

Home Reversion involves selling part or all of your property, for less than its market value, to a home reversion provider, in return for a lump sum or a series of payments. The property is sold after you die or move into long-term care, with the proceeds divided up according to the terms of the agreement. You can continue living in the property as a tenant. 

When considering equity release, it’s important to consider how it might affect your financial situation later in life. Seeking advice from a qualified professional will help you make an informed decision and limit the chances of any nasty surprises down the line.

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