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Equity release helps retired couple purchase a new home
Equity Release Council

Equity Release

What is Equity Release and how does it work?

Equity release is an increasingly popular way for UK homeowners to fund a more comfortable and enjoyable retirement. In fact, you don’t have to wait until you are retired – if you’re 55 or older, you can unlock some of the value ‘tied up’ in your home with the help of a Lifetime Mortgage.

There are other equity release products available – called Home Reversion Schemes – but at Advice for Later Life we only advise on lifetime mortgages. The main reason is that you will retain full ownership of your home with a lifetime mortgage.

Any cash released through a lifetime mortgage is tax-free and can be spent however you desire. The mortgage is only paid back when the last homeowner dies or moves into long-term care. Unlike a regular mortgage, you don’t have to make any repayments during the term of the loan unless you chose to do so. Instead, interest is added to the mortgage and is only payable at the end, usually through the sale of your property.

In the meantime, you continue to own your home and can enjoy living in it for as long as you need.

For a more in-depth look at the features of a lifetime mortgage and how they differ from other types of equity release, read our page What is a lifetime mortgage?

What are the Benefits of Equity Release?

Equity release can provide a tax-free lump-sum or income to help make your retirement more financially comfortable and enjoyable.

The most popular way to take an income is via a drawdown facility. This is where you take an initial lump-sum and then take regular or ad hoc amounts whenever you need extra cash. You can continue withdrawing funds up to the total amount of the arranged Lifetime Mortgage, but there is no obligation to do so.

You have the freedom to spend the proceeds on virtually anything you wish. Some of the reasons you might release equity are:

  • Clear your existing mortgage
  • Pay off credit cards, car loans and other debts
  • Home and garden improvements
  • Buying a new property
  • Buying a new car
  • Enjoy better holidays or a holiday home
  • Increase your disposable income
  • Helping your loved ones by gifting an early inheritance

Depending on your circumstances, you may be able to enjoy several of the above uses of equity release. For more information on how a lifetime mortgage could improve your quality of life, read What can I use equity release for?

Is Equity Release Safe?

In a word, yes.

Equity release is one of the most highly regulated areas of the UK financial industry. The industry regulator – the Financial Conduct Authority – says you must receive professional advice from an authorised specialist before you can take out a Lifetime Mortgage.

As members of the Equity Release Council, Advice For Later Life only recommend products which meet the highest industry standards. These include:

  • The right to remain in your home for life
  • The right to move to another property (so long as it meets the lender’s criteria)
  • A ‘no negative equity’ guarantee. This means that your estate can never owe more than your home is worth

That said, a Lifetime Mortgage is a debt secured against your home and, as such, it is not suitable for everyone. For example, if you’re receiving state benefits, releasing equity could reduce your benefits. It will also reduce the value of your estate meaning there will be less for your loved ones to inherit.

How to find out more

Advice For Later Life offer a free initial consultation either face to face or by telephone. One of our fully qualified advisers will take time to explain how a lifetime mortgage works and find out whether it is right for you. If equity release isn’t for you, or you don’t wish to go ahead right away, that’s absolutely fine – there is no obligation to take things further.

If you’re over 55 and wish to know whether you can take advantage of equity release, please send us your details in the form below.

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