• Lifetime mortgage: you take out a mortgage secured on your property provided it’s your main residence, while retaining ownership. You might be able to ring-fence some of the value of your property as an inheritance for your family. You can choose to make repayments or let the interest roll-up. The loan amount and any built-up interest is paid back by selling the property when the last borrower dies or when they move into long-term care.
• Home reversion: you sell part or all of your home to a home reversion provider in return for a lump sum or regular payments. You have the right to continue living in the property until you die, but you have to agree to maintain and insure it. You can ring-fence a percentage of your property for later use, possibly for inheritance by only selling part of your property. The percentage you retain will always remain the same regardless of the change in property values, unless you decide to take further cash releases. When the last borrower dies or moves into long-term care your property is sold and the sale proceeds are shared according to the remaining proportions of ownership.

Equity release might seem like a good option if you want some extra money and don’t want to move house.

But, there are some reasons why equity release might not be the best fit for you.

• Equity release can be more expensive in comparison to an ordinary mortgage. If you take out a lifetime mortgage you will normally be charged a higher rate of interest than you would on an ordinary mortgage and your debt can grow quickly if the interest is rolled up.
• For lifetime mortgages, there is usually no fixed “term” or date by which you’re expected to repay your loan. The rate of interest of a lifetime mortgage will not change during the life of your contract, unless it’s a variable rate. The interest rate you pay on any drawdowns will be determined at the time of drawdown and not at the time the contract is entered into so this may be different to the previous rate. If you take any additional borrowing the interest rate you pay may be different and it will only be applicable to that cycle of extra borrowing.
• Home reversion plans will not give you the true market value of your home when compared to selling your property on the open market due to the fact you’re allowed to live in the property for the rest of your life, which you could not do so if you sold the property on the open market.
• If you release equity from your home, you might not be able to rely on your property for money you might need later in your retirement. For instance, if you need to pay for long-term care.
• Although you can move home and take your lifetime mortgage with you, if you decide you want to downsize later on you might not have enough equity in your home to do this. This means you might need to repay some of your mortgage.
• The money you receive from equity release might affect your entitlement to state benefits.
• You will have to pay arrangement fees, which can reach approx. £1,500 – £3,000 in total, depending on the plan being arranged.
• If you’ve taken out an interest roll-up lifetime mortgage, there will be less for you to pass onto your family as an inheritance.
• These schemes can be complicated to unravel if you change your mind.
• There might be early repayment charges if you change your mind, which could be expensive, although they are not applicable if you die or move into long-term care.
• These schemes can impact the inheritance you pass down to family members. It’s important to discuss your plans with your family in order to avoid potential conflicts and complications later on.

• A lifetime mortgage is the most popular type of equity release.  You borrow a mortgage which is eventually repaid once your house is sold after you die. The older you get, the more you can release, with the percentage you can borrow ranging between 18% and 50% of the total value.
• What is the minimum age you can take out a lifetime mortgage? Usually, it’s 55. We’re all living longer so the earlier you start the more it’s likely to cost in the long run especially if you choose not to pay interest during the term of the lifetime mortgage.
• What’s the maximum percentage you can borrow? You can borrow a percentage of the value of your property, but this depends on a number of factors such as your age and the value of your property. The percentage typically increases according to your age when you take out the lifetime mortgage, while some providers might offer larger sums to those with certain past or present medical conditions.
• Can the interest rate be fixed? Yes, but if they’re variable, there must be a “cap” (upper limit) which won’t change for the life of the loan (Equity Release Council standard).
• Make sure the product has a “no negative equity guarantee”. This means when your property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan to your provider, neither you nor your estate will be liable to pay any more (Equity Release Council standard).
• Ensure you have the right to move to another property subject to the new property being acceptable to your product provider as continuing security for your equity release loan (Equity Release Council standard). Different lifetime mortgage providers might have slightly different policies.
• Whether you can pay none, some or all of the interest. If you can make repayments, it will reduce the total amount of interest payable when the property is sold. With a lifetime mortgage where you can make monthly payments, the amount you can repay might be based on your income. Providers will have to check you can afford these regular payments.
• Whether you can withdraw the equity you’re releasing in small amounts as and when you need it or whether you have to take it as one lump sum. The advantage of being able to take money out in smaller amounts is you only pay the interest on the amount you’ve withdrawn. If you can take smaller lump sums, make sure you check if there’s a minimum amount.

Home reversion allows you to sell some or all of your home to a home reversion provider.

With this, you can sell all or part of your home but maintain your right to live it.  Your money will be paid either by lump sum or become a regular income. One downside of this is that you will no longer receive full market value for your home, and in some cases, you can only apply if you are over 60.

The provider effectively co-owns your home, unless you’ve sold the whole property, but you keep the right to live there for the rest of your life, potentially rent-free.

In return you’ll get a lump sum or regular payments.

You’ll normally get between 20% and 60% of the market value of your home (or of the part you sell).

When considering a home reversion plan, you should check:

• Whether or not you can release equity in several payments or in one lump sum.
• The minimum age at which you can take out a home reversion plan. Some home reversion providers insist you’re at least 60 or 65 before you can apply.
• The percentage of the market value you will receive. This will increase the older you are when you take out the plan but might vary from provider to provider.

What level of maintenance you’ll be expected to carry out and how often your property will be inspected (this could be every few years).

If you’re thinking of taking out an equity release product, you should take financial advice from an independent financial adviser. They’ll be able to suggest a plan suitable for your needs by researching all the products on the market. 

All advisers recommending equity release schemes must have a specialist qualification.

If you sold your house for cash, how much would you walk away with? This amount is the ‘equity’ you have; the market value of your property without any unpaid mortgage. 

Selling your house is not the only way to generate money from it. If you own your house outright, you are able to apply for an equity release scheme which will allow you access to a large portion of the money tied up in it.

With equity release, you can receive a significant amount of money, and remain in your home, something that’s very useful should you need to cover the cost of large expenses like long-term care.

Unfortunately, as with most things in finance, there are negatives to this process and several restrictions.  There are two routes to take, lifetime mortgages and home reversion schemes which are generally available to any aged 55-95.

To stop people losing out, the Equity Release Council was set up. They can make sure you stay in your home until you are no longer able to, and make sure you never owe them more than the total sale price.  Employing a solicitor to review any documents relating to this is advised before you sign up.

Speak to a financial adviser as soon as you change your mind about the scheme. It might be a change of circumstance, or a change of heart that lead you to want to exit but bear in mind that it can cost to leave early.  In addition to this, moving home doesn’t affect the scheme, you simply have to tell the equity release company who will adjust.

Martin Lewis does not explicitly recommend equity release, but does say that in certain circumstances, it may be a good way to access money tied up in your home to help you enjoy a more comfortable retirement. Whether it’s right for you though will depend on your personal and financial circumstances. Advice from a professional is recommended. 

Williams introduce to Derek Barton CeMAP, CeRER, who has over 20 years experience in the mortgage and equity release sector. 

The Tavistock Group with Abacus manages the personal wealth of tens of thousands of people and over £1Billion of investments, providing them with financial advice and access to investment products and services. Tavistock Partners (UK) Limited is authorised and regulated by the Financial Conduct
Authority, FCA number 230342, and is a wholly owned subsidiary of Tavistock Investments Plc 

Williams introduce to Derek Barton CeMAP, CeRER, who has over 20 years experience in the mortgage and equity release sector. 

The Tavistock Group with Abacus manages the personal wealth of tens of thousands of people and over £1Billion of investments, providing them with financial advice and access to investment products and services. Tavistock Partners (UK) Limited is authorised and regulated by the Financial Conduct
Authority, FCA number 230342, and is a wholly owned subsidiary of Tavistock Investments Plc