Frequently Asked Questions
1. What is equity release?
Equity release allows homeowners aged 55 or over to access some of the money tied up in their property without necessarily having to sell and move home.
2. Why might I consider equity release?
Common reasons include clearing an existing mortgage, supplementing retirement income, making home improvements, helping family members financially, paying for care or funding major expenses.
3. Do I have to move home?
No. One of the main attractions of equity release is that you can normally remain living in your home, provided you meet the terms of the plan.
4. Can I use equity release to repay my mortgage?
Yes, this can be one of the reasons for using equity release. It may be particularly relevant where an existing mortgage is approaching the end of its term and cannot easily be repaid or refinanced.
5. Can I use equity release to help my children?
Potentially. Some people release equity to provide a gift towards a house deposit, help with university costs or provide other financial assistance to family members.
6. Can I take the money as a lump sum?
Yes. Depending on the product and your circumstances, you may be able to take a lump sum. Some plans can also provide regular additional payments.
7. Will I still own my home?
With a lifetime mortgage, you normally retain ownership of your property. The amount borrowed, plus any applicable interest, is generally repaid when the plan ends, usually when the last borrower dies or moves into long-term care.
8. Does equity release affect inheritance?
It can. The more you release and the longer the plan runs, the greater the potential impact on the amount eventually left to your beneficiaries.
Some products offer features designed to protect a percentage of the property's future value for inheritance, although this can affect the amount you are able to release.
9. Will equity release affect my benefits?
It can potentially affect entitlement to means-tested benefits, depending on how much money you release and what you do with it.
10. Does interest have to be paid every month?
Not necessarily. With some lifetime mortgages, interest can be added to the outstanding balance rather than being paid monthly. This means the amount owed can increase over time.
11. Can I repay equity release early?
Potentially, but early repayment charges may apply depending on the product and when you repay it. This should be considered before taking the plan.
12. Are there alternatives to equity release?
Yes. Depending on your circumstances, alternatives could include:
- Downsizing
- Remortgaging
- A conventional later-life mortgage
- Using savings or investments
- Taking a smaller amount of equity
- Continuing with an existing mortgage
A comparison of the available options is important before making a decision.
13. Is equity release suitable for everyone?
No. It is a long-term commitment and can affect inheritance, benefits and your overall financial position.
Professional advice should be obtained to establish whether it is appropriate for your circumstances.
14. When should I consider equity release?
There is no particular age when you should take equity release. It is usually worth considering it when you have a specific financial need and have established that other options may not be suitable.