What is equity release?
Equity release is a way for homeowners aged 55 and over to take out some of the equity (the share of the property you own outright) while carrying on living there. You get the money as a tax-free lump sum or as a series of smaller payments, and what you owe is repaid when you die, move into long-term care, or sell up.
With a standard mortgage you make monthly payments. With most equity release plans you do not. The interest compounds instead, which means it is added to the balance and then charged again the following year. So the amount owed climbs each year, and that eats into the equity left in the property and the inheritance you can pass on.
Every equity release plan sold in the UK through a member of the Equity Release Council carries a no-negative-equity guarantee. That means you will never owe more than your home is worth, whatever happens to property prices.
Who is eligible for equity release?
To qualify, you need to be 55 or over (both of you, if you are applying jointly), own a home in the UK, and that home has to be worth at least £70,000. Most lenders also want the property to be your main residence and in reasonable condition.
How much you can release comes down to your age and what your property is worth. The older you are, the higher the percentage of your home’s value you can usually take. A 55-year-old might release 20% to 30% of their home’s value; a 75-year-old might release 40% to 55%.
Common reasons people choose equity release
People release equity for all sorts of reasons. Some want to top up their retirement income and live a bit more comfortably. Others put it towards home improvements or adaptations, care at home or for a relative, a deposit to help children or grandchildren buy their first place, clearing an existing mortgage or other debts, or a holiday they have been putting off.
Whatever your reason, check whether equity release is really the cheapest way to get there before you commit. Other routes include downsizing, a retirement interest-only mortgage, a remortgage, or benefits you may already be entitled to claim.
Safeguards and regulation
The Financial Conduct Authority regulates equity release, and any adviser who recommends it has to hold a specific qualification to do so. On top of that, Equity Release Council members give you further protections: the no-negative-equity guarantee, the right to stay in your home for life, and the freedom to move the plan to another suitable property if you relocate.
You also have to take independent legal advice before an equity release plan can complete. Your solicitor checks that you understand the terms and what they mean for you before you sign. At Clearview Mortgage Solutions we back these safeguards fully and make sure every client knows exactly what they are agreeing to.
Take the first step with Clearview
Equity release is a big decision, and it affects both your estate and your family. Our qualified advisers get to know your situation first, then take you through the lifetime mortgage and home reversion options, plus the alternatives, so the choice you land on is the right one for you.
Get in touch for a free, no-obligation first chat about whether equity release could work for you.