What are the types of equity release?

A lifetime mortgage allows you to obtain a loan on your property but you retain full ownership of the property. The loan is normally taken out as a cash lump sum.

There are no repayments due on the loan until you, or your partner if part of a couple, dies or sells the property. At this point the interest and capital become payable out of the proceeds of the sale.

There are two main types of lifetime mortgages:

Roll-up Lifetime Mortgages

A roll-up lifetime mortgage allows you to borrow money secured against your home.

You receive an agreed sum against the value of your property and interest payments are added each year to the loan.

The total amount repaid to the provider when the property is eventually sold is the initial loan amount plus any accumulated interest.

For most plans the interest rate is fixed and will not change during your lifetime.

Fix Repayment Lifetime Mortgage

With a fixed repayment mortgage, the amount you repay is set from the outset of the plan.

This amount is calculated depending on criteria such as your age, health and property value.

When you, and your partner if part of a couple, have passed on or wish to sell the property, the provider will take the agreed sum from the proceeds of the property sale.

Home Reversion Schemes

A home reversion scheme involves you selling part or all of the value of your property to the equity release provider in exchange for a lump sum.

The cash lump sum that you would receive is not a representation of the full market value of the property. This is because you will continue to live in your home with no rent for the duration of your life. The provider will only receive a return on their investment after your death, or when you decide to leave, for example to move into residential care.

If you only sold part of your property to the provider, then after your death the home would be sold and the part you retained will be passed to your estate, the remainder will go to the plan provider.

Implications

- Equity release could affect your entitlement to some state benefits and may affect your tax position.

- All equity release plans will reduce the value of your estate.

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Testimonials "The hard copy of the brochure was very helpful as it meant I could explain to my family and loved ones in my own time, over a pot of tea. It was nice to know where I stood regarding suitability and what the interest rates would be for my particular case. Mr. Townsend, Raleigh