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Home Equity Release
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What is equity release?

Get the facts about equity release from the Mortgage Advice Bureau Later Life advisers.

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What is equity release?

An equity release plan allows homeowners aged 55 and over to access some of the tax-free cash locked in the value of their home. 
 
The value of your home, minus any outstanding mortgage and any other loans secured against it, is the equity you have in your property. This equity is often passed on as an inheritance, however, an increasing number of people are tapping into some of this wealth to help boost their retirement finances. 
 
A lifetime mortgage is one type of equity release and is a loan secured against your home. There are plans which allow you to take your tax-free cash in one lump sum or have it available to drawdown as and when you need it following an initial, smaller, lump sum release. With a drawdown plan, you only pay interest on the money released.
 
There are typically no monthly repayments for you to make with a lifetime mortgage, as the loan, plus compound interest, is repaid when the plan ends. That’s usually when the last remaining applicant either passes away or enters long term residential care. 

Will I still own my own home?

With a lifetime mortgage, you’ll still own your home and can stay in it for as long as you like, subject to your plan’s terms and conditions.

Will I ever fall into negative equity?

No. All plans that meet the Equity Release Council’s standards come with the no negative equity guarantee, meaning you’ll never owe more than your home’s worth.

Can I move house?

Yes. All plans that meet the Equity Release Council’s standards allow you to transfer your plan to a new home (subject to criteria).

Can I still leave an inheritance?

Yes, you can. Some lifetime mortgages guarantee that a set percentage of your home’s value, at the time your plan ends, will form part of your estate for you to pass on to others in your will.

Can I take out equity release if I still have a mortgage?

Yes, however, you’ll need to repay the mortgage using the money released. Any leftover funds are yours to enjoy. 

The benefits

  • You can unlock cash from your home, tax-free, to help meet your needs in later life
  • You’ll always retain full ownership of your home and can stay in it for as long as you wish
  • You can choose to make reduced or no monthly repayments to suit your circumstances
  • You’ll never owe more than your home’s worth
  • You may be able to remortgage your plan in the future to release further funds or secure a better interest rate, although this isn’t guaranteed and may be subject to early repayment charges

Potential drawbacks

Your equity release adviser will also outline the following important things to think about:

  • A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly
  • Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
  • Equity release may leave you with limited or no property equity remaining
  • Equity release will reduce your financial options in the future
  • A lifetime mortgage is a long-term financial product and is not designed to be fully repaid until the death or entry into long-term care of the last remaining borrower, otherwise early repayment charges may apply

Retirement interest only mortgages

A retirement interest only mortgage (RIO) is a mortgage that allows you to pay off the interest on the amount borrowed. The loan is repaid when the plan comes to an end when you (or the last remaining applicant) either pass away or move into long term residential care. RIOs are typically available to people over the age of 55 who have retired.

Later life residential mortgages

If you thought you were too old for a standard mortgage or can't find a conventional one to meet your needs , we can refer you to our expert mortgage advisers to help. Later life residential mortgages can be used to buy a new property, remortgage an existing one, or release additional funds. It can be on a capital repayment or interest only basis

Things to consider

Because we play by the book we want to tell you

  • Mortgage Advice Bureau Later Life offer lifetime mortgage products from a carefully selected panel of providers.
  • We understand equity release isn't for everyone, and we'll never say it's the right option for you unless we're certain.
  • As part of our advice process, we'll consider whether retirement interest-only (RIOs) and other mortgages may be suitable and can arrange advice on these if appropriate. Advice fee will vary.
  • Unless you decide to go ahead, our service is completely free of charge, as our fixed advice fee of £1,295 would only be payable on completion of plan.