What Is Equity Release and How Does it Work?

What is equity release?

Equity release is a way for you to access the wealth tied into the value of your house so you can put it to positive use, without having to sell your property or move out.

Various types of equity release plan are available, but the way they work is usually similar: you receive tax-free money as either a single lump sum or in multiple instalments, and the plan provider is repaid when the property is sold either on the death of the homeowner, or when they move into permanent residential care.

Equity release is designed for people aged 55 or over who either own their house outright, or have only a small portion of their mortgage left to pay off. It’s usually done on the understanding that the money will not be paid back to the lender until the property is sold, usually when the owner passes away, or has to go into care.
What is equity release?
Release up to 50% of your home’s value
Receive a tax-free lump sum or drawdown
Lifetime Mortgage and Home Reversion options
Experienced advisers covering the whole UK
Schemes available from all major providers

How does equity release work?

Equity release enables you to continue living in your home while providing the means to improve your quality of life. All money taken through equity release is tax-free. Equity release plans are designed for people aged 55 or over who either own their home outright, or have only a small portion of their mortgage left to pay off. It is usually done on the understanding that the money will be paid back to the lender when the property is sold, typically when the owner passes away or has to go into care. Unlike a mortgage or other type of loan, the homeowner doesn’t need to make any regular repayments while they continue to live in the property.

 

How much does it cost?

The most common type of equity release plan – a lifetime mortgage – pays out a tax-free sum secured against the equity in your home; that is, the difference between the total value of your home and any mortgage or loans already secured against it. How much you will be able to borrow – and the rate of interest you will be charged – will depend on the amount of equity available in addition to other factors, such as the number of people applying, and the age and health of the homeowners.

Interest rates are usually either fixed or, if variable, have an upper cap or limit for the life of the loan. The interest continues to build up for as long as you continue to live in your home, and the amount borrowed plus the total interest is repaid to the plan provider when the property is sold. Equity release plans provided by members of the Equity Release Council also have a “no negative equity guarantee” – that means the amount owed to the plan provider will never be more than the total value of the property when it is sold.

A second type of equity release – home reversion – works slightly differently, as explained on our page about the different types of equity release. Alternatively, visit our equity release calculator page for an estimate of how much you might be able to borrow.

 

What do I need to know?

Equity release can be a positive way for older homeowners to free up the cash value of their homes, whether that’s to pay for a holiday, a wedding, helping a younger family member get on the property ladder, or just making life a little more comfortable in retirement. However, it is important to consider all the aspects and to take advice from a qualified professional before proceeding. Here at Premier Equity Release, we have years of experience in helping homeowners understand the ins and outs of equity release, and finding the plan that’s right for them. Get in touch with us today to discuss how we can help.

 

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How much equity could I access?

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Who do we work with?

There are a few key providers in the Equity Release market that also work within the Equity Release Council’s guidelines. As trusted providers, we’re happy to work with all of them: