Introduction

Equity release can be a complex topic with various nuances. These frequently asked questions (FAQs) aim to clarify both basic and more intricate aspects of equity release, helping you gain a better understanding of how it might impact your financial planning.

The Basics

What is equity release?

Equity release is a financial arrangement that allows homeowners, typically over the age of 55, to access the equity (cash) tied up in their homes. This can be done either through a Lifetime Mortgage or a Home Reversion Plan, enabling homeowners to receive a lump sum, regular payments, or both while continuing to live in their property.

Who is eligible for equity release?

To be eligible for equity release, you generally need to be over 55 years old, own a property in the UK, and have a property of a certain minimum value, usually around £70,000. The property should also be your main residence.

Can I still leave an inheritance if I take out equity release?

Yes, you can still leave an inheritance, but the amount may be reduced due to the equity release. Some plans offer an inheritance protection guarantee which allows you to safeguard a portion of your property’s value for your heirs.

Other FAQs

How does equity release affect my state benefits?

Equity release can impact your eligibility for means-tested benefits, such as Pension Credit and Council Tax Support. The additional income or capital you receive might push you over the threshold for these benefits. It’s essential to seek financial advice to understand how equity release could affect your specific circumstances.

What are the costs involved in equity release?

Costs can include arrangement fees, legal fees, and advice fees. If you choose a Lifetime Mortgage, the interest will accrue over time, increasing the total amount to be repaid. It’s important to factor in these costs when considering equity release.

Can I move houses if I have taken out equity release?

Yes, you can move to a new house, but the new property must meet the lender’s criteria, and you may need to repay some of the equity release if the new property is of lower value. This process, known as ‘porting’, is not guaranteed and depends on the terms of your equity release plan.

What happens to my equity release plan if I pass away or go into long-term care?

If you pass away or move into long-term care, the equity release plan typically needs to be repaid. For a Lifetime Mortgage, this is usually done by selling the property. If you have a Home Reversion Plan, the property is already partly or wholly owned by the provider. The house is sold, and the proceeds are used to repay the plan, with any remaining value going to your estate or beneficiaries.