A Guide to Unlocking Property Value for Retirement Income.

 

What is Equity Release?

Equity release is a financial arrangement that allows homeowners, typically aged 55 or above, to access a portion of the value of their property without the need to sell or move. This method is commonly used in the United Kingdom as a way to supplement retirement income.

 

How Equity Release Works.

As the value of your home increases, you build up equity, which is the part of the property that you own outright. Equity release enables you to unlock some of this equity and convert it into cash.

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The funds released can be provided in several ways:

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• As a single lump sum.

• Through regular scheduled payments.

• Via a drawdown facility, which allows you to access funds as needed.

 

Repayment of the released funds usually happens under the following circumstances:

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• Upon your death.

• When you move into long-term care.

 

In either situation, the property is sold to repay the outstanding loan.

 

Main Types of Equity Release.

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1. Lifetime Mortgage. (Most Common)

A lifetime mortgage is the most popular form of equity release in the UK. It enables individuals to borrow money secured against their property while still retaining ownership. Interest accrues and is added to the loan, typically on a compound basis, and there are generally no monthly payments required. The loan is repaid when the property is sold, either after the homeowner passes away or enters long-term care. Lifetime mortgages are regulated by the Financial Conduct Authority.

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2. Home Reversion Plan.

With a home reversion plan, you sell part or all of your property to a provider in exchange for a lump sum or regular payments. You retain the right to live in your home rent-free for the rest of your life. When the property is eventually sold, the provider receives their share of the proceeds. Home reversion plans are less common than lifetime mortgages.