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What is equity release?

Equity release allows homeowners over 55 to unlock the value in their property by turning it into a cash lump sum or regular income.

There are typically no monthly repayments to make and you continue to own and live in your home until you die or move into permanent care. Only then is your plan normally repaid from the sale proceeds of your property.

If you are over the age of 55 and a homeowner, you are probably eligible to take out an equity release plan. The money you release is tax-free and yours to spend on what you want. Popular choices are home improvements, repaying debts, helping children on to the property ladder or simply enjoying later life.

The main downside of equity release is that it will reduce the value of your estate, but there are ways to minimise this through inclusion of features within many of the plans.

Are you thinking about retiring or reducing your hours at work? Do you want to maintain your lifestyle, or do you have big plans for the future?

If you do, then you’ll appreciate just how important it is to have the money in place to enjoy financial freedom - and not have to worry about how you are going to pay for things.

However, if you don’t have a substantial pension pot or savings in place, living comfortably in your later years could be easier said than done.

This is where equity release can help.

What are the benefits of equity release?

Financial freedom:

At Equity Release Supermarket, no one tells you what you can or can’t do with your money. Whether you want that new kitchen or holiday you’ve always dreamed of, or want to help your children buy their first home, it’s up to you how you spend your cash. Your money is tax-free and what’s more, you can take your money as a lump sum, income or in several smaller chunks – giving you more flexibility.

No need to downsize:

Equity release means you don’t have to experience the stress, inconvenience, and cost of moving out of your family home to a smaller property. It provides not only financial freedom, but importantly - freedom of choice.

No negative equity guarantee:

All equity release schemes we recommend come with no negative equity guarantees. This means that the amount you owe isn’t driven by house price changes. Instead the guarantee means your dependents will never have to repay any more than the value of your home at that time.

"We were very happy with the whole procedure.
Darren could not have been more helpful, even in suggesting a reasonably priced solicitor for our son."

Mr & Mrs S, Derby

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Types of equity release

Lifetime mortgages

A lifetime mortgage is the most common type of equity release scheme and is usually secured against your main residence. This is a mortgage designed to run for the lifetime of the homeowner, in which the property remains 100 per cent in your name.

Unlike traditional mortgages, there are typically no month-to-month repayments to make, but most plans now have the facility to make voluntary repayments to help control the balance, if needed. There are many flexible options which can be included with lifetime mortgages, which provide the facility to:

  • Make repayments either on an ad-hoc or regular basis via voluntary or monthly repayments which can help control the future mortgage balance.
  • Protect an element of equity by including an Inheritance Protection Guarantee, which safeguards a percentage of your estate to pass onto your loved ones.
  • Take future tax-free cash withdrawals on a drawdown lifetime mortgage basis, following the creation of an initial cash reserve facility.
  • Include innovative features such as downsizing protection and compassionate early repayment, both helping negate the need to pay early repayment charges.

Home reversion

A home reversion plan is different to a lifetime mortgage. Here, a home reversion provider buys a percentage (or all) of your property (at less than market value) and in return gives you a tax-free cash lump sum. The homeowners are then given a lifetime tenancy that enables them to live rent-free in the property for the rest of their lives.

By selling a percentage of the value of your house, you are effectively ring-fencing part of its final value for your beneficiaries. When the last homeowner dies or moves into long-term care, the house is sold, whereupon the respective percentages are then divided accordingly between the lender and beneficiaries.

Don’t worry - this sounds a lot more complicated than it actually is. And what’s more, our friendly advisers will be happy to explain everything in a language that’s easy to understand.

Things to consider

Which equity release scheme is best for you will depend on your personal circumstances and your requirements. Lenders will only accept an equity release application following advice from an authorised and qualified equity release adviser. Therefore, to obtain impartial advice on which equity release schemes is best for you, independent equity release advice should always be obtained from companies such as Equity Release Supermarket.

Our advisers will always provide impartial, quality advice from the whole of the market, with no pressure. This allows you to make a decision in your own time, either in the comfort of your own home or over the telephone, whichever suits. We would also recommend that the subject of releasing equity should be discussed with your family and they are welcome to attend any meetings.

Releasing equity from your property is an important decision to make. Equity release can affect the future inheritance of your beneficiaries, not to mention your own finances. Therefore, it’s important that best advice is sought due to the complexity and variations between all equity release schemes.