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How does equity release work?

How can I release equity from my home?

The most popular way to release equity in the UK is with a product called a Lifetime Mortgage. A Lifetime Mortgage allows homeowners over the age of 55 to access a portion of their property wealth as a tax-free cash lump sum, without selling their home or moving.

With a Lifetime Mortgage you still own the property in full, you have just borrowed against it. Interest is charged on the amount you borrow, with the rate of interest normally being fixed for life.

You can choose to release equity all in one go, or to access a smaller sum now and create an interest-free reserve for use in the future. Either way, there is no requirement to to make monthly payments if you do not wish to and no affordability checks to pass. As a result, you may still be able to release equity if you have a poor credit history.

Lifetime Mortgages are designed to run for your lifetime, with the amount borrowed, plus interest accrued, only due for repayment once the last homeowner has passed away or entered into long-term care. Typically, the Lifetime Mortgage balance is repaid via the sale of the property, with a no-negative equity guarantee ensuring that you will never owe more than the value of your home.

If you decide to repay the Lifetime Mortgage early, then early repayment charges may apply, depending on the plan that you choose. It may be more beneficial to consider moving with the Lifetime Mortgage as all the Lifetime Mortgages we offer are portable, as long as the new property meets the lender’s criteria.

Your adviser will provide you with a personalised illustration, and explain the potential impact of releasing equity on the value of your estate over time and on your entitlement to means-tested benefits.

How much equity can I release?

The amount of equity you can release is determined by multiple factors, but the main ones are your age and the value of your home. In order to be eligible to release equity, you need to be over 55 years of age and own your own home, worth at least £70,000.

The older you are, and the more that your home is worth, the more equity you could potentially be eligible to release. To see an estimate of the amount that you could release, use our free online calculator today.

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Equity release calculator

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With our Responsible 5-star service, you can trust that:

  • We will compare products from across the whole of the equity release market, using available products from lenders who are members of the Equity Release Council.
  • You will be offered a free no-obligation appointment with an expert adviser.
  • All of your options and potential costs will be explained in everyday terms.
  • One adviser will guide you through the whole process.
  • The impact releasing equity will have on your estate and entitlement to means-tested benefits will be fully explained.

What can you achieve with equity release?

Once you have received your tax-free sum, you can go about achieving your ambitions. Whether you want to fund home improvements, gift an early inheritance or make large purchases, releasing equity can give you the funds needed to improve your lifestyle.

Many people choose to release equity to clear an existing mortgage and remove the burden of monthly repayments. In fact, this is the most popular reason our customers give for releasing equity. As long as you can clear the outstanding mortgage amount with the amount released or use a combination of other funds and equity release, you are still fully eligible to use any leftover funds in whichever way you choose. You can even release equity to buy a second home, provided that your original property remains your primary residence for at least 6 months of the year.

It is important to note that you should not commit to any spending related to your Lifetime Mortgage until the funds are in your account.

There are multiple factors that lenders will take into consideration when deciding if your property is suitable to release equity, including that it be habitable. Individual property eligibility depends on the criteria of different lenders and an adviser will be able to help you find a plan that works for you.

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