Equity is the difference between any mortgage you may have and the value of your home. Equity release may be a suitable way for older homeowners to unlock some of the value of their property, without having to move home, to provide a lump sum or a regular income (or both).

Under current legislation, the minimum age at which a homeowner can apply for equity release is 55.  It is usually for those who have paid off their mortgage or who have very little left to pay.

Equity can be released in three ways:

• Taking out a type of mortgage, known as a ‘lifetime mortgage’, which is usually designed to run for the rest of your life or until you sell the property.
• Selling all or part of your home to a reversion company for a proportion of the market value, known as a ‘home reversion’.  This arrangement allows you to live in your home for the rest of your life, or until you sell the property . Once you have sold all or part of your home to a reversion company you cannot change your mind.
• Taking out an interest only loan for life, known as a ‘lifetime mortgage’.  The mortgage balance remains level and interest is added every month; you do not make a monthly payment.  The interest rolls up and the mortgage balance increases over time; the total debt is paid off on death or when you sell the property.

Equity release could affect your income tax position and your entitlement to state benefits; it could also restrict future options for moving house or paying for long term care. If using an equity release plan to consolidate debt, you are taking a previously unsecured debt and securing it against your home. Equity release could reduce the value of your estate that your beneficiaries expect to inherit. You should talk to them before committing to a plan. Using equity release to raise investment capital is inadvisable under most circumstances and you should talk to an investment adviser if this is your intention. We can arrange this for you.