Green Fields

How Equity Release Works..

Equity release is a way that homeowners in later life can release cash from their home without having to move. You borrow money against the value of your home, but pay nothing back until the debt is repaid from the sale of your home – either after your death or if you go into a care home.

Alternatively, you can raise money by selling your home, or part of it, but continue to live in it until you die or go into a care home.

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But first, there are quite a few things to consider. Equity release is a big decision and might not be the best or the only solution. If you receive state benefits, what will the impact be? If your circumstances change, will it affect your ability to move? If you have children, how will they feel about it?

You may want to discuss it with them first. Most importantly, you should get specialist independent financial and legal advice before signing up for equity release.

There are advantages and disadvantages to choosing equity release ....

Advantages include:

  • You can get a lump sum, regular income, or both and you don’t have to move house.
  • Reputable plans guarantee you’ll be able to continue living in your home until you die or go into a care home

Disadvantages include:

  • With a lifetime mortgage, the interest is added to the amount you owe – because you pay interest on interest, the amount you owe can grow very quickly.
  • You will get much less than full market value if you sell some or all of your property through a home reversion scheme
  • If you get married, or decide to live with someone in your property after you take out the scheme, the plan may come to an end on your death and your partner may have to move out.
  • If you want to move to a new property, you may not be able to transfer the scheme to your new home – it depends on the scheme and the new property.
  • If you die soon after taking out a scheme, you could have effectively sold off your home (or a part of it) cheaply – but some schemes give families a rebate if you die within the first few years of signing up.

To understand the risks of equity release by using lifetime mortgages/home reversion schemes, ask for a personalised illustration

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