A guide to equity release
Equity release has become an increasingly popular way for older homeowners to access the value built up in their property. With house prices having risen significantly over recent decades, many retirees find that their home is their largest asset but their income is limited. This guide explains how equity release works and what you need to consider.
In this guide
What is equity release?
Equity release is a way for homeowners aged 55 and over to access some of the equity in their property while continuing to live there. You receive either a tax-free lump sum or a series of smaller payments, and the amount you owe is repaid when you die, move into long-term care, or sell the property.
Unlike a standard mortgage, you do not typically make monthly repayments. Instead, the interest compounds over time and is added to the loan balance. This means the amount owed grows each year, which reduces the equity remaining in the property and the inheritance you can leave to your family.
All equity release plans sold in the UK through members of the Equity Release Council come with a no-negative-equity guarantee. This means you will never owe more than the value of your home, regardless of what happens to property prices.
Who is eligible for equity release?
To qualify for equity release, you must be aged 55 or over (both applicants if buying jointly), own your own home in the UK, and your property must be worth at least £70,000. Most lenders require the property to be your main residence and in reasonable condition.
The amount you can release depends on your age and the value of your property. As a general rule, the older you are, the more you can release as a percentage of your home’s value. A 55-year-old might release 20% to 30% of their home’s value, while a 75-year-old might release 40% to 55%.
Common reasons people choose equity release
People use equity release for a wide range of purposes. Some want to supplement their retirement income and enjoy a better quality of life. Others use it to fund home improvements or adaptations, pay for care either at home or for a family member, help children or grandchildren onto the property ladder, repay an existing mortgage or debts, or pay for holidays and experiences.
Whatever your reason, it is essential to consider whether equity release is the most cost-effective option compared to alternatives such as downsizing, a retirement interest-only mortgage, remortgaging, or state benefits you may be entitled to.
Safeguards and regulation
Equity release is regulated by the Financial Conduct Authority, and all advisers must be specifically qualified to recommend these products. Members of the Equity Release Council provide additional protections including the no-negative-equity guarantee, the right to remain in your home for life, and the freedom to move your plan to a suitable alternative property.
You are also required to receive independent legal advice before completing an equity release plan. Your solicitor will ensure you understand the terms and implications before you sign. At Clearview Mortgage Solutions, we strongly support these safeguards and ensure every client fully understands what they are agreeing to.
Take the first step with Clearview
Equity release is a significant financial decision that affects your estate and your family. At Clearview Mortgage Solutions, our qualified equity release advisers will take the time to understand your situation, explain all the options including alternatives to equity release, and ensure you make the right choice.
Contact us for a free, no-obligation initial conversation about whether equity release could work for you.
Related guides
More guides in our equity release mortgage hub.
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