What Is Equity Release?

Equity Release is a term that is used for a wide variety of mortgage products that allow you to release some of the value enshrined in your mortgage property. The value tied up in your property is referred to as equity and is available for homeowners who are over the age of 55.

Taking into consideration the numerous mortgage lenders playing in the market, there are several equity release products which have also been released, all offering some perks which have been designed to interest homeowners. A general feature of the equity release products however is the ability to allow property owners free up their cash in either a tax-free lump sum or in smaller amounts which may be collected in tranches after the initial release.

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How Does Equity Release Work?

There are principally two types of Equity Release products offered. These two type of equity release options include the lifetime mortgages and home reversion products.

To gain a little bit of knowledge about these products, below are some of the most important things you need to know.

  • Lifetime Mortgages

A lifetime mortgage product is one that allows the homeowner to release equity in the form of a mortgage which is secured against the home. With this product, homeowners do not lose ownership of their property and do not have to move away from it after equity has been released.

With the lifetime mortgage product, homeowners are not subject to typical monthly repayments and roll up interests as these are all repaid at the end of the plan. The plan however comes to an end when the holder of the property dies or moves away into a long term care facility.

For some products, homeowners may be presented with the flexibility of paying any interest they can afford, while those worried about inheritance for their loved ones may also be able to add an inheritance protection guarantee to their plan.

With the inheritance protection guarantee in place, specific proportion of the future value of the property is ring-fenced thus guaranteeing that your loved ones can inherit the property.

  • Home Reversion Plans

The home reversion plan is quite different from the lifetime mortgage plan. For the home reversion plans, equity released is generated from selling a part or all of the home back to the scheme provider. While property owners will not get the full value of the property, there is however a guarantee that they will be exposed to a fair price and be granted a lifetime lease to remain in the property for as long as possible.

One of the benefits of the home reversion plan is that it will not require the homeowner to move out of the home while also barring monthly repayments or the burden of monthly rent payment. The home reversion plan also does not accrue interest.

It is also possible to ring-fence a portion of the property’s future value for inheritance purposes in this case. When the property is sold, the proceeds are divided as per the specifics of the individual plan which has been agreed upon by the homeowner and the estate will benefit from any future rises in price on any portion of the property which ownership has been retained.

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The Process of an Equity Release

Releasing cash from your home can be done in 5 simple steps.

1. Calculation

Access a free, no-obligation quote from an online equity release calculator to get an idea how much cash you could release from your home.

2. Enquiry

Lodging an enquiry with your provider will expose you to a free home visit from your chosen equity release adviser or, in some cases; this can be carried out via more convenient platforms such as telephones, video calls and more. The equity release adviser will discuss in details your options and lend you professional insight into making the best decisions.

3. Personalized Illustration

Following advice from the equity release adviser, you can make personalized decisions on whether to choose the equity release for your home or choose other means of funding to attend to your current financial needs. If you decide to proceed with the release, your adviser will conduct a thorough research and provide you with compiled personalized equity recommendations which are best fitted for you.

4. Application Process

After choosing the best plan which suits your specific needs from the compiled list made by the adviser, you begin the process of application where your home will be subject to an independent, professional valuation. Based on the valuation, an offer will be presented to you by the plan provider detailing all aspects of the equity release plan.

5. Completion

Generally, the overall process should take between 8 and 12 weeks to completion. However, the process may be expedited in some cases.