Equity Release Features & Benefits
Equity release comes with a range of options designed to provide flexibility, security, and financial peace of mind. These features ensure that homeowners can access the value in their property in a way that suits their individual circumstances.
Types of equity release
Lifetime mortgage
A lifetime mortgage is the most common type of equity release. It allows you to borrow money against the value of your home while retaining full ownership.
The loan and any accrued interest are typically repaid when the home is sold, usually after you pass away or move into long-term care.
There are no monthly repayments unless you choose to make voluntary payments to reduce the loan balance or interest.
Lump sum plans
With the lump sum option, you receive the entire loan amount as a one-off payment. This is ideal if you need a lot of money upfront for significant expenses such as home renovations, paying off debts, or helping family members.
Example: You might need £50,000 to complete major home renovations that make your property more suitable for retirement. A lump sum equity release gives you immediate access to the funds, which are repaid when your home is sold, without needing monthly repayments.
Drawdown plans
The drawdown option allows for more flexibility. You can take out an initial lump sum and then access additional funds from a pre-agreed reserve as and when needed.
You only pay interest on the money you’ve withdrawn, making it a cost-effective option if you need access to smaller amounts of money over time.
Example: Imagine you initially withdraw £20,000 to help a family member with a financial gift or fund smaller home improvements. A few years later, you might need another £10,000 to remodel your kitchen and modernise your home.
With drawdown, you can access these additional funds without having to reapply, and you’ll only pay interest on the amounts you’ve withdrawn.
Interest-only plans
With an interest-only lifetime mortgage, you can choose to make monthly payments to cover the interest on the loan.
This prevents the interest from building up, keeping the loan balance from growing.
This option suits those who want to manage the cost of the loan while keeping more of their home’s value intact for inheritance.
Example: Let’s say you borrow £100,000 on an interest-only plan. You opt to make monthly interest payments, so when the property is sold, only the £100,000 loan needs to be repaid.
Enhanced rates
Some lifetime mortgage plans offer an enhanced equity release option for those with certain health or lifestyle conditions.
This can allow you to unlock more equity than a standard plan.
Factors such as smoking, obesity, or specific health conditions may increase the amount you can borrow, as providers may offer more based on a shorter life expectancy.
Home reversion
With a home reversion plan, you sell part or all of your home to a provider in exchange for a lump sum or regular payments. While you no longer fully own your home, you can live rent-free.
The provider receives their share when the house is eventually sold.
Key features of equity release
Inheritance protection: Many plans offer the option to protect a portion of your home’s value, allowing you to leave an inheritance for your loved ones. This ensures that a fixed percentage of your property’s value remains untouched by the equity release loan.
Downsizing protection: Some equity release plans offer downsizing protection if you move to a smaller home later. You can repay the loan early without penalties if your new home doesn’t meet the lender’s requirements. This feature gives you flexibility as your housing needs change.
No monthly repayments: With equity release, you are not required to make monthly repayments. The loan and accrued interest are typically repaid when the property is sold after you pass away or move into long-term care.
Portability: If you decide to move, most equity release plans allow you to take the loan with you, provided the new property meets the lender’s criteria. This will enable you to move without disrupting your financial arrangements.
No negative equity guarantee: Regulated equity release providers offer a no negative equity guarantee. This means you will never owe more than the value of your home when it is sold, protecting your estate from being burdened with additional debt.
Voluntary repayments to reduce interest: Some equity release plans allow you to make voluntary repayments toward the loan or interest. This will enable you to reduce the loan balance or stop interest from building up as quickly as possible. If your financial circumstances improve, you can use this feature to manage your future debt better and leave a larger inheritance for your loved ones.
Involvement of a solicitor: One of the key features of the equity release process is the mandatory involvement of a solicitor. The solicitor’s role is to ensure that you fully understand the terms of your plan, explain the legal implications, and ensure that the process is conducted correctly. The solicitor will provide independent legal advice, protecting your interests and ensuring you know the impact equity release will have on your home and estate. Their involvement adds an important safeguard, helping you make an informed decision.
Safeguards for vulnerable customers: Equity release is regulated to protect vulnerable individuals. This includes mandatory independent financial and legal advice to ensure customers fully understand the long-term implications of their decision. Providers also assess whether equity release suits each individual’s financial situation, providing the right choices are made.
Benefits of equity release
Family consultation: Many equity release providers encourage or require family consultation to ensure loved ones are aware of and understand the decision being made. This helps avoid future misunderstandings and reassures homeowners that their family is involved in the decision. It also provides transparency, helping everyone understand how equity release affects the estate.
Access to tax-free cash: The funds you release through equity release are tax-free, allowing you to spend them as needed. Whether for home improvements, travel, or helping family members, you have complete control over how to use the money.
Stay in your home: Equity release allows you to remain in your home for as long as you choose, providing financial flexibility without the need to downsize or move. You can continue living in the place you love while unlocking its value to support your lifestyle.
Helps with long-term care costs: The funds from equity release can be used to cover long-term care expenses, allowing you to stay in your home while receiving the care you need. This provides peace of mind for those who need additional support as they age.
Considering the costs and drawbacks
While equity release offers a range of benefits and financial flexibility, it’s crucial to fully understand the potential costs and drawbacks before deciding.
Factors such as interest accumulation, the impact on your estate, and the effect on any means-tested benefits should all be carefully considered.
To help you make an informed choice, explore our dedicated page on the costs and drawbacks of equity release for a detailed overview.
Is equity release right for you?
Equity release offers various features and benefits designed to provide financial freedom while allowing you to stay in your home. Whether you need a lump sum for large expenses or prefer the flexibility of a drawdown plan, equity release can help you unlock the value of your home to enhance your retirement.
However, seeking independent financial advice and legal support from a solicitor is essential to ensure that equity release is the best option for your specific circumstances.
Find an adviser
Find a qualified and regulated equity release adviser using the Equity Release Council's register.
How much can you release?
You can usually release a minimum of £10,000, but the maximum amount varies based on several factors, such as your property's value and your age.
Typically, the older you are, the more you can release.
Are you looking for a quote?
While we do not provide a quote or call-back service as our website is purely informational, we understand that some people do want an equity release quote.
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To find out how to get the best equity release quote read our guide
