What is Equity Release

What is Equity Release

Equity Release Mortgages: The Complete Guide

You’re short of cash and desperately in need of better financing to meet unplanned expenses, what’s the most comfortable and most beneficial thing you can do?

Let me tell you this...

At SovereignBoss, we are more than glad to expose the attractive benefits of an equity release and guide you in understanding why it’s ideal, and how it can effortlessly enable you to access the wealth that’s accumulated with the present value of your property. And you will not have to lose comfort by moving out.

One significant advantage of equity release is that it gives property owners the ability to enjoy tax-free cash that they can withdraw from the equity held in their homes.

How Does Equity Release Work?

For a better understanding, equity release is an efficient method that enables homeowners over the age of 55 to release or borrow some of their real estate’s equity to fund other necessities or fulfilments. Homeowners have the choice of picking whether to withdraw the loan as a cash lump sum or as a sizeable monthly flow of income. It’s all dependent upon your plan and your needs; you can even get a combination of both.

Equity release enables you to access tax-free finances to support your home upgrades or to sustain your income after you retire.

Types of Equity Release Schemes

It would help if you keep in mind these two options whenever you are pondering equity release:

What is Equity Release

A Lifetime Mortgage

Some people prefer to release the secured mortgage on their principal residential property and still maintain ownership. You too can close in some value from your property’s like an inheritance for your family by either repaying sizeable amounts or allowing the interest to turnover.

Keep these in mind as you look at a lifetime mortgage:

You can only qualify for a lifetime mortgage once you have reached or surpassed the minimum required age, which is 55 at the least. Life expectancy is a lot higher now, thus the earlier you take up a lifetime mortgage, the sooner it’s likely to become costly as time passes.

Look at this:

You must also know and fully understand the maximum percentage that’s available for you to borrow. By standard, you can borrow up to 60% of your property’s worth. Although, the ratio rises in correlation with your age when you take out the lifetime mortgage. Some providers might also make more generous sums of money available for people with particular medical afflictions or history.

In case you might be asking yourself...

You can legally stay in your principal residence until life requires you to shift into long-term care, provided that you meet all the terms and conditions that the equity release council standardises.

The advantage of being able to release equity cash in smaller frequent amounts is that you will also only have to pay interest on the amount you withdraw.

A Home Reversion

Another option for equity release is the ability to sell your home either as a whole or just a part of it, as a home reversion plan, and get regular sizeable payments or a one-off cash lump sum.

Important facts to note as you look at a home reversion plan:

Primarily, get a clear understanding of whether you can draw your equity release as a one-off cash lump sum, or in smaller sizeable payments. You should also be clear of the exact percentage that you will receive as income from the market. A rate that increases the older you get, but remains a variant between providers.

It's true...

Some providers for home reversion plans usually insist that you are at least between 60 and 65 years old before they consider your eligibility.

And the good news is:

As with a lifetime mortgage, you may also occupy your principal residential property for the rest of your life or up to the time you need to shift into long-term care. Still, provided you adhere to the conditions of your contract and the agreement concerning the level of maintenance you should expect to carry and the frequency of inspections for your property.

Equity Release Explained: Facts You Must Know

Equity release is an excellent option when you need to access some extra money but don’t want to move out of your house.

What is Equity Release

However, there are essential facts to consider:

Equity release proves to be more costly when you contrast it with a regular mortgage. After you release equity as a lifetime mortgage, your debt might explode when you allow the interest to get rolled up and pay interest at higher rates than a regular mortgage.


Your service provider must ensure to factor all the safeguards of your agreement as they make calculations and some up your service. For instance, they should assert your no negative equity guarantee and fixed interest rates throughout the equity release contract you’ll sign, and perhaps letting you borrow at varying interest rates in contrast to typical mortgage’s.

The interest rate for your lifetime mortgage will only get altered when you get more funds or top up on your borrowing, and that must only apply to the cycle concerning the extra funds borrowed.

More to that....

Equity release from your property may cause you to no-longer depend on your property as a source of funds you might require later during your retirement void. Perhaps if you decide you would like to downsize in the future, you might fall short of the required equity from your home to supplement that, which means you might need to repay the mortgage partially.

Consider this:

The funds you’ll get from your equity release might affect your entitlement to some state benefits as too. Also, you may risk having fewer funds to leave as an inheritance for your family if you release with an interest roll-up scheme.

What does this mean for you?

You must take on equity release plans with utmost precaution because they might get complicated to unravel if you reconsider. You might incur serious repayment fees if you have a change of preference, which is an unnecessary expense, although the charges become void when someone dies or moves into permanent care.

Seeking Renowned Advice

If you’re considering drawing an equity release plan, take heart to seek renowned financial advice from an independent financial adviser that’s got specialist qualifications in providing recommendations and solutions on profitable equity release.

A renowned financial advisor will confidently help you exercise your ability to determine whether equity release is right for you. And you will receive knowledgeable recommendations on the best equity release plan to meet your requirements, utilising results from thorough professional research of the entire equity release market.

Your Ideal Equity Release Consultant

You must be sure that your adviser is in the registers as a member of the Financial Conduct Authority, by searching for the firm’s details. Every firm on the FCA register is under regulation. It must register with the Financial Ombudsman Service, which is a service provided for you to issue any complaints freely whenever you’re not satisfied with the services you get.

Be aware of this:

You should also ensure that your adviser is a registered member of the Equity Release Council’s directory for members. This registration certifies your insurance that they’ll comply with the trade body’s Terms and Conditions that supersede basic requirements.

Simply put...

For your sole advantage, make sure your service provider’s search encompasses the entire market as they seek the perfect equity release plan for you.

You must set the priority of asking your adviser what fees you will pay, the equity release services they offer, and any other costs you may incur, for instance; valuation, set-up, or legal fees.

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