Equity release
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Equity release
If you’ve been a homeowner for a while, have been paying off a mortgage for many years or put down a large deposit when you bought your home, you will have money tied up in the value of your property. This is called equity. With equity release, you can access some of that money, without having to sell your home or move out. It’s a big financial decision to make, but it’s a hugely beneficial option in the right circumstances.
As equity release is a big decision, it’s one that should be approached with care, professional advice and a clear understanding of what that means for you, your home and your finances going forward. As experienced mortgage brokers, we’re able to help. At Everest Mortgages, we provide expert guidance to help you decide whether equity release fits with your retirement plans, lifestyle and future needs.
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What is equity release?
Equity release is a way for homeowners to access money that’s tied up in the value of their property, without having to sell their home or move out. It is designed mainly for people aged 55 and over and it’s intended as a long-term financial solution, so it’s not a decision to make lightly. If your property is worth more than any mortgage or loans secured against it, the difference between those amounts is known as your equity. For example, if your home is worth £300,000 and your mortgage is worth £150,000, the remaining £150,000 is your equity.
With equity release, you can unlock this money, whilst continuing to live in your home. The money you release is typically repaid when the property is sold, which usually happens after you pass away or if you move into long-term care.
How does equity release work?
Equity release doesn’t work like a standard mortgage or home loan. Rather than being repaid monthly over a fixed term, equity release is designed to last for life. Once it’s in place, you can access your funds in a way that suits your needs, either as a lump sum, smaller amounts taken over time or a regular income.
The amount available to you depends on several factors, including your age, the value of your home and the type of equity release plan chosen. As equity release agreements usually last for life, it’s important to fully understand how interest, repayments and future property value may affect the overall cost. This is something Everest Mortgages can help you with.
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Lifetime equity release vs. home reversion equity release
There are two main equity release options available, lifetime and home reversion. Both of these allow you to remain living in your home, but they work in different ways.
Lifetime equity release
A lifetime equity release agreement is the most common form, and it’s a long-term loan secured against your property, while you retain full ownership. In this scenario, you agree a maximum borrowing limit with the provider, and then funds can be taken as a lump sum or drawdown, or a mixture of both. Interest is then charged on the amount borrowed. You can choose to make repayments, make partial repayments, or allow interest to roll up.
The loan and interest are repaid when the property is sold, usually after death or if you move into long-term care. Many lifetime equity release agreements include important protections, such as a no negative equity guarantee, meaning you will never owe more than the value of your home.
Home reversion equity release
Home reversion enquiry release works differently and instead of borrowing money, you sell part or all of your property to a home reversion provider. In return, you receive a tax-free cash lump sum, or a regular income. You retain the legal right to live in the property for the rest of your life, rent free.
However, the portion of the home sold is usually at less than market value, and you no longer own the full property. When the home is eventually sold, the provider receives their agreed share.
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The benefits of equity release
Equity release can be used in a variety of ways, depending on your personal needs and financial goals. There are a number of reasons to consider equity release, including:
- Repaying an existing mortgage
- Boosting your retirement income
- Funding home improvements or adaptations
- Covering care or healthcare costs
- Clearing outstanding debts
- Providing financial support to family members
When used appropriately, equity release can offer several benefits, such as:
- You can receive tax-free funds to use however you wish
- There’s no requirement for you to move home, allowing you to remain in familiar surroundings.
- Choose from various flexible repayment options.
- There’s no affordability assessment to worry about, which isn’t the case with a mortgage.
- It brings peace of mind for joint applicants, as the surviving borrower can usually remain in the home.
Is equity release right for you?
Equity release can be helpful for some homeowners, but it is not suitable for everyone, which is why you need to carefully consider it as an option. Whether it makes sense for you depends on a wide range of personal factors, such as your age, health, income, savings and the value of your property. Your plans for later life and potential care needs will also need to be taken into account, as well as whether or not you want to leave an inheritance for loved ones.
As equity release is a specialist area of mortgage advice, it’s important to seek expert advice. At Everest Mortgages, we understand the need for equity release, and we also understand the complexities of organising it. That’s why we take the time to explain your options, assess alternatives and ensure the route you choose aligns with your long-term goals.
FAQs
Frequently asked questions
Do I still own my home with equity release?
Yes, with a lifetime equity release agreement, you remain the legal owner of your home. With a home reversion plan, you sell part or all of your home to the provider, meaning you’re no longer the owner of the entire property.
Can I move house after undergoing equity release?
Usually, yes. Many lifetime equity release agreements can be moved to another suitable property, as long as your lender approves. If the new property doesn’t meet the lender’s criteria, you might need to repay some or all of the loan.
How much money can I release from my home with equity release?
The amount depends on several factors, such as your age, the property value and the specific plan chosen. Usually, the older you are, the more equity you can access.
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