If you own your own home, you may be considering equity release as a way to release some cash (equity) from its value. However, equity release is a big decision. You should consider it carefully and get specialist advice before making any decisions.
There are two main types of equity release:
- Lifetime mortgage: you borrow a certain amount of money against the value of your home, which does not usually have to be paid back until you die or move into long-term care.
- Home reversion scheme: you raise money by selling your home, or a share of it, to a private company. You retain the right to live in it, usually until you die or move into long-term care.
If you take out a lifetime mortgage or home reversion plan with a partner, the money does not usually need to be paid back or the home sold until the last remaining borrower dies or moves into care.
Understanding the features and risks of equity release is complicated. It’s important to seek advice from a fully qualified and experienced equity release adviser, who can give you more information on equity release and help you choose a plan that meets your needs, and an independent solicitor, who can explain more about the legal risks and benefits of equity release and represent you if you decide to take out a plan.
The upfront fees for setting up equity release plans can be expensive so make sure the decision is right for you before you make any commitment.
Who can get equity release?
There are certain conditions you must meet before being able to take out an equity release plan. Generally they include:
- you and your partner are above a certain age, usually 55 for lifetime mortgage and 60 for home reversion. The older you are the more you can release.
- if you have an existing mortgage or secured loan, you will need to use the money you release to pay it off immediately; you’ll then be free to use whatever money is left over for your other financial needs.
- you must own your home in the UK and it must be your main residence.
- your home must be over a certain value. It may need to be in a reasonable condition too.
How does equity release affect benefits?
Equity release can affect any benefits you receive, and may have an impact on any benefits that you may become entitled to in the future.
If you receive any means-tested benefits, they may be reduced or lost entirely. Means-tested benefits include:
- Pension Credit
- Jobseeker’s Allowance
- Income Support
- income-related Employment and Support Allowance
- Universal Credit
- Council Tax Support
A specialist equity release adviser will be able to advise what will happen to your benefits if you take out a plan.
What should I do now?
Read our factsheet on equity release for further infromation on:
- what to consider before deciding on a particular product;
- equity release regulations and safeguards;
- how to choose an equity release adviser who is authorised by the Financial Conduct Authority (FCA).