Later life lending
Equity release advice starts with how it works: it lets homeowners aged 55 or over access money tied up in their home without having to move. The most common type is a lifetime mortgage, where the loan and interest are usually repaid when your home is sold, after you pass away or move into long-term care. It isn't the only option, so it's worth understanding how it works and what else is available.
There are two main types of equity release: a lifetime mortgage, where you borrow against your home and keep owning it, and a home reversion plan, where you sell all or part of your home in exchange for a lump sum. Most equity release plans taken out are lifetime mortgages.
You borrow money secured against your home and keep full ownership. You don't have to make monthly payments, so interest is usually added to the loan and the amount owed grows over time.
You sell all or part of your home to a provider for less than its market value, in return for a lump sum or regular payments. You can live there rent-free for the rest of your life.
Features, ages and amounts depend on the individual provider and your circumstances.
A lifetime mortgage is a loan secured against your home that you don't have to repay while you live there. Interest is usually added to the loan each year, and because interest is then charged on the interest, the amount you owe can grow quickly over time.
How much you can release usually depends on your age, your home's value and sometimes your health. The older you are, the more you may be able to release.
You take all of the money in one go. Interest is charged on the full amount from the start.
You take an initial amount and keep a reserve to draw on later. You only pay interest on the money you've actually taken.
Many plans let you pay some or all of the interest each month, or make voluntary repayments, to slow down or stop the loan from growing.
Certain health or lifestyle conditions may mean some providers let you release more or offer a different rate.
Some plans let you ring-fence a percentage of your home's value to pass on, although this reduces how much you can release.
Plans from members of the Equity Release Council have to meet a set of product standards designed to protect you and your family. These are the six standards to look for.
Source: Equity Release Council product standards. Always check that a plan meets all of them.
For some people it can be the right choice, but it's a big decision with long-term effects for you and your family. These are the main things to weigh up before going ahead.
If you don't make payments on a lifetime mortgage, interest is added to the loan each year and charged on itself, so the balance can grow significantly over time.
Releasing equity reduces the value of your estate, which means less inheritance. Many people find it helps to talk it through with their family first.
Releasing money from your home can affect your entitlement to means-tested benefits, now or in the future.
Repaying the plan early, outside of the situations where charges are waived, can mean high early repayment charges.
There can be advice, valuation, arrangement and legal fees, so it's worth knowing the full cost before you commit.
Think about whether you might want to move, downsize or need care later on, and how the plan would work if you did.
Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. Equity release may involve a lifetime mortgage or home reversion plan, which is secured against your property. To understand the features and risks, ask for a personalised illustration.
There are other ways to borrow or free up money in later life. Depending on your income and plans, a retirement interest-only mortgage, a standard mortgage or downsizing could suit you better. It's worth comparing them before you decide.
Many of the people who speak to us about equity release go on to choose a retirement interest-only mortgage instead. You pay the interest each month, so the amount you owe stays the same rather than growing.
Some lenders offer repayment or interest-only mortgages into later life, based on your income in retirement.
Moving to a smaller or less expensive home can free up money without borrowing at all.
Some people use savings, pensions or other assets they already have instead of borrowing.
Some families choose to help with costs now, rather than waiting for an inheritance later.
Clear answers to the questions people ask most about equity release. Everything depends on the provider and your individual circumstances. For more detail, read our equity release guide.
It's a way for homeowners aged 55 or over to access money tied up in their home without moving. The two main types are a lifetime mortgage, where you borrow against your home and keep owning it, and a home reversion plan, where you sell all or part of your home. The loan is usually repaid when your home is sold.
You usually need to be 55 or over for a lifetime mortgage, and 60 or 65 for a home reversion plan. For joint applications, it's based on the age of the youngest borrower. The exact age limits depend on the provider.
It usually depends on your age, your home's value and sometimes your health. The older you are, the higher the percentage of your home's value you may be able to release, and some plans offer more if you have certain health conditions. What's available depends on the provider and your circumstances.
With a lifetime mortgage, yes. You keep full ownership of your home and the loan is secured against it. A home reversion plan is different: you sell all or part of your home to the provider, although you can usually live there rent-free for the rest of your life.
It reduces the value of your estate, so there will usually be less to leave to your family. Some lifetime mortgages let you protect a percentage of your home's value as an inheritance, although this reduces how much you can release.
Yes, but early repayment charges can be high, so it's important to check the terms. Many newer plans let you make penalty-free payments, and charges are waived in some situations, such as moving into a relative's home for care. The terms depend on the provider.
Usually, yes. Plans that meet the Equity Release Council's standards give you the right to move to another property, as long as the provider accepts the new home as security for the loan. If it doesn't, you may need to repay the plan.
It means you or your estate will never owe more than your home sells for, even if the loan has grown larger than its value. It's one of the Equity Release Council's product standards, so plans from council members must include it.
It can. Releasing money from your home may affect your entitlement to means-tested benefits, now or in the future, so it's important to understand the impact before going ahead.
A lifetime mortgage doesn't require monthly payments, so the amount you owe usually grows over time. With a retirement interest-only mortgage, you pay the interest each month, so the amount you owe stays the same, and lenders check you can afford the payments from your income.
Speak to Harry or Lois about your later-life options to see what's possible. We'll talk through how equity release and a retirement interest-only mortgage compare for your situation, so you can make the right decision for you and your family.
Prefer to talk now? Call 01787 209880 or email [email protected]
Book a free, no-obligation call with Lois or Harry and find out what's possible for you.
