Equity release

Equity release

If you’re a homeowner aged over 55 wanting cash to enjoy in your later life, equity release might be an option for you. Equity release is a product that enables you to release some money from the value of your home in the form of a lifetime mortgage. A lifetime mortgage is a long-term loan on the value of your home that won’t be repaid until you die or go into long-term care.

Equity release lets you release tax-free cash from the value of your home.

A lifetime mortgage is a loan secured against your home, which you either receive as a tax-free lump sum or monthly payments. However, unlike a mortgage or other type of loan, you won’t need to make any monthly repayments. Instead, interest is added to the loan each year, and this debt won’t need to be repaid, usually via the sale of your home, until you die or need to go into long-term care.

The main benefit of equity release is that it can provide you with cash to enjoy in your retirement while allowing you to stay in your home. However, a lifetime mortgage will reduce the amount of inheritance you can leave as it reduces the equity in your home. It may also affect your tax position and eligibility for welfare benefits. So, taking out a lifetime mortgage isn’t a decision to consider lightly, and we recommend seeking independent advice.

An alternative to equity release for older borrowers is a retirement interest-only (RIO) mortgage. With a RIO mortgage, you could release cash from your home, and as you continue to make monthly interest payments protect any remaining equity to leave as an inheritance.