Equity Release Explained

The main methods of Equity Release are:

1. Home Reversion

Home Reversion is when you sell all or part of our home for a regular income, lump sum, or both. You can continue to live there. This is called a Home Reversion Plan. A Home Reversion Plan allows homeowners to release a lump sum from their property, without concerns over future house prices, or the effects of roll up interest. With a Home Reversion Plan, customers sell all or part of their property to the Home Reversion Provider. In return they get a cash lump sum or income. As they are selling their property in exchange for the equity released, the plan provider takes the risk on future house prices.

The property, or the part of it sold, belongs to the reversion provider, but customers are allowed to carry on living in it for the rest of their life. This means they sell the legal ownership of their home but will be guaranteed the right to live there for as long as they wish through a secure lifetime lease. In the case of joint applications, this applies to both parties, so both interests are fully protected. Age is a primary factor in determining the percentage released on the survey value of the property. Other factors, such as gender and the estimated future value of the property, are also taken into consideration. Any secured loans or mortgages must be paid off on the sale of the house.

2. Lifetime Mortgages

With Lifetime Mortgages, you take out a loan that is secured on your home. You continue to live in your home, although you have to pay back the mortgage.

The mortgage is repaid from the proceeds of the sale of your home when you die, or if you move out or move into care. You usually receive your money as a cash lump sum, to use as you wish. This does vary from plan to plan, and differs depending whether you opt for a plan that provides cash upfront, or an income plan.

Further cash releases are often available through Drawdown Lifetime Mortgages. 

3. Partial Release

With Partial Release, the customer is able to tailor the Equity Release plan to release the amount required for their current needs, while still having the guarantee of further cash releases if or when they are required in the future. 

Future cash releases are based on the customer's older age and the property value at the time of future release.  This option appeals to customers who want to retain a financial interest in their property and allows them to benefit if the property increases in value.