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Types of Products

Things to consider

The most suitable plan for you will depend on a number of considerations, including:

  • How much cash you need
  • The value of your property
  • Whether you want all the cash straight away
  • The age of you and your partner
  • How much, if any, you want to guarantee as an inheritence
  • Your health and lifestyle choices

 

Lifetime Mortgage

A lifetime mortgage allows you to release a lump sum of cash from the value of your property. There are no regular repayments to make as the amount is repaid from the money made when the property is sold. Generally this is when you pass away, move into long-term care or permanently leave the property. Some plans do allow the flexibility to make repayments within limit should you wish to.

Advantages

  • Plans are available from the age of 55
  • The cash you release is tax free and can be spent on whatever you like.
  • You continue to own 100% of your home, thereby benefiting fully from any future increase in its value.
  • There are no monthly repayments to make with a lifetime mortgage.
  • The ‘no-negative-equity’ guarantee ensures that you can never pass on debt to your estate.
  • Plans can allow you to protect an inheritance for your family.
  • All plans are regulated by the Financial Conduct Authority.

Disadvantages

  • The size of the mortgage will grow over time. This is because interest is added to the original loan amount and it continues to roll up as future interest is added on top of this.
  • If you want to increase the amount of equity released beyond the original amount agreed, you would normally have to apply for a further advance, which would not be guaranteed.
  • Your tax position and eligibility of means-tested benefits may be affected now and in the future, as might your options for moving or selling your home in the future.
  • The amount that you will leave as an inheritance is likely to be reduced.
  • If you wish to pay off the equity release plan early, you may have to pay an early repayment charge these differ from plan to plan.

Drawdown lifetime mortgage

This is similar to the standard lifetime mortgage. However, with the drawdown lifetime mortgage, you can access
your money with more flexibility. Rather than just receiving a one-off lump sum, you have the option to release your cash over time, as and when you need it. Because you only pay interest on the cash that you have taken, these plans can often prove to be more cost-effective and at the same time provide peace of mind that there are funds for future needs should they arise.

Advantages

  • Plans are available from the age of 55
  • The cash you release is tax free and can be spent on whatever you like.
  • Rather than taking all of the funds upfront, you can release equity over time, as and when it suits you.
  • Because you are only taking what you need, when you need it, you could accrue a reduced amount of interest.
  • You continue to own 100% of your home, thereby benefiting from any future increase in its value.
  • There are no monthly repayments to make with a drawdown lifetime mortgage.
  • The ‘no-negative-equity’ guarantee ensures that you can never pass on debt to your estate.
  • Plans can allow you to protect an inheritance for your family.
  • All plans are regulated by the Financial Conduct Authority.

Disadvantages

  • The size of the mortgage will grow over time, this is because of the roll up of interest. Although, this can be limited by only releasing what you need, when you need it.
  • If you want to increase the amount of equity released beyond the original amount agreed, you would normally have to apply for a further advance, which would not be guaranteed.
  • Your tax position and eligibility for means-tested benefits may be affected now and in the future, as might your options for moving or selling your home in the future.
  • The amount that you will leave as an inheritance is likely to be reduced.
  • If you wish to pay off the equity release plan early, you may have to pay an early repayment charge these differ from plan to plan.

Interest-only lifetime mortgage

This is similar to a standard lifetime mortgage, however, you can choose to make repayments of the interest charged thereby maintaining the debt at the original amount and reducing the overall cost and impact on the value of your estate.

Advantages

  • Plans are available from the age of 55.
  • The cash you release is tax free and can be spent on whatever you like.
  • You continue to own 100% of your home, thereby benefiting fully from any future increase in its value.
  • By paying the interest each month you limit the impact of releasing equity on the size of your estate.
  • With some interest-only lifetime mortgages, you can release considerably more than would be available from a standard lifetime mortgage.
  • Plans can allow you to protect an inheritance for your family.
  • All plans are regulated by the Financial Conduct Authority.

Disadvantages

  • With some type of interest-only products, your home may be repossessed if you do not keep up repayments on your mortgage.
  • Your tax position and eligibility for means-tested benefits may be affected now and in the future, as might your options for moving or selling your home in the future.
  • The amount that you will leave as an inheritance is likely to be reduced.
  • If you wish to pay off the equity release plan early, you may have to pay an early repayment charge, these differ from plan to plan.
  • Some interest only plans will be subject to affordability assessment.

Home reversion plan

This type of plan allows you to exchange the ownership of some or all of your property for a lump sum of cash, along with the right to stay in your property, rent-free, for as long as you live. This is also known as a ‘lifetime lease’.

Advantages

  • Plans are available from the age of 65.
  • The cash you release is tax free and can be spent on whatever you like.
  • There are no monthly repayments to make.
  • You know at the outset what share of your home you will be leaving to loved ones in your estate.
  • The older you are, the more money you will generally be able to release.
  • You can typically raise a larger sum from your home with a reversion plan than would be available with a lifetime mortgage.
  • You can benefit from any future increase in the value of the proportion of the property that you still own.
  • Plans can allow you to protect an inheritance for your family.
  • All plans are regulated by the Financial Conduct Authority.

Disadvantages

  • You will no longer benefit from any future house price rises on the proportion of the property that you have sold.
  • If you pass away soon after taking out the plan, you may have effectively sold some or all of your property, although some plans make provisions for this eventuality.
  • Reversion plans cannot usually be reversed as you are selling part of your home.
  • Your tax position and eligibility for means-tested benefits may be affected now and in the future, as might your options for moving or selling your home in the future.
  • The amount that you will leave as an inheritance is likely to be reduced.
  • If you wish to buy back the proportion of your house you sold then this would have to be bought back at market value and not at the discounted rate you sold it for.
  • Because you can continue living in your home, rent-free, for life, you would generally receive an amount for your property that is lower than its market value.


Alternatives to equity release

Whilst most people we speak to feel at home in their property and don’t want to move, you should be aware that there may be alternative options that should be considered such as:

  • Downsizing
  • Help from family
  • Conventional borrowing
  • Using other assets
  • Possibility of local authority grants
  • Eligibility for benefit

Another way of raising funds from your property could be to take in a lodger although generally this is less appealing due to the invasion of privacy that it brings.

We will only recommend that you go ahead with an equity-release plan if we firmly believe it to be in your best interests.

Please call us today and talk with one of our advisers who will answer any questions you may have.


Equity release may involve a lifetime mortgage or home reversion plan. To understand the features and risks, ask for a personalised illustration.

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