{"id":6495,"date":"2025-06-19T13:59:50","date_gmt":"2025-06-19T12:59:50","guid":{"rendered":"https:\/\/new.contentdeployment.co.uk\/quilter\/?p=6495"},"modified":"2025-06-19T14:17:19","modified_gmt":"2025-06-19T13:17:19","slug":"an-introduction-to-equity-release","status":"publish","type":"post","link":"https:\/\/new.contentdeployment.co.uk\/quilter\/2025\/06\/19\/an-introduction-to-equity-release\/","title":{"rendered":"An introduction to equity release"},"content":{"rendered":"<div class=\"hd-block hd-block-table\">\n<figure class=\"wp-block-table\"><table><tbody><tr><td>There are two main types of equity release: lifetime mortgages and home reversion plans<\/td><td>Drawing up a budget will help you work out how much money you will need, and when you\u2019ll need it<\/td><td>Plans come with a variety of features and benefits, and it\u2019s important that your plan meets your needs<\/td><\/tr><\/tbody><\/table><\/figure>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h2 class=\"has-x-large-font-size\">Contents<\/h2>\n<\/div>\n\n<div class=\"hd-block hd-block-list\">\n<ul><div class=\"hd-block hd-block-list-item\">\n<li><a href=\"#two-ways-to-release-equity\">Two ways to release equity<\/a><\/li>\n<\/div>\n\n<div class=\"hd-block hd-block-list-item\">\n<li><a href=\"#this-mortgage-is-for-life-usually\" data-type=\"internal\" data-id=\"#This mortgage is for life (usually)\">This mortgage is for life (usually)<\/a><\/li>\n<\/div>\n\n<div class=\"hd-block hd-block-list-item\">\n<li><a href=\"#home-reversion-means-selling-a-stake-in-your-home\">Home reversion means selling a stake in your home<\/a><\/li>\n<\/div>\n\n<div class=\"hd-block hd-block-list-item\">\n<li><a href=\"#equity-release-standards\" data-type=\"internal\" data-id=\"#Equity release standards\">Equity release standards<\/a><\/li>\n<\/div>\n\n<div class=\"hd-block hd-block-list-item\">\n<li><a href=\"#top-tips\" data-type=\"internal\" data-id=\"#top-tips\">Top tips<\/a><\/li>\n<\/div><\/ul>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p><strong>Many people approach retirement owning the family home and would like to access some of the value stored in its bricks and mortar. Downsizing is one option but, if you still need the space or a move seems too daunting, equity release may provide an alternative solution. If you are 55 or older, it could turn some of your home\u2019s value into cash, without forcing you to relocate; but it\u2019s no magic money tree, as plans may be expensive and often inflexible.<\/strong><\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h2 class=\"has-x-large-font-size\" id=\"two-ways-to-release-equity\"><strong>Two ways to release equity<\/strong><\/h2>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>There are two main types of equity release: lifetime mortgages and home reversion plans. With a lifetime mortgage, you borrow a percentage of your home\u2019s value but retain ownership. Under a home reversion plan, you sell an agreed proportion, or all of your home to the plan provider. Both types are subject to Financial Conduct Authority (FCA) regulation and each has its pros and cons.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>Equity release activity has been growing and older homeowners unlocked \u00a32.3bn of property wealth during 2024<sup>1<\/sup>. In parallel with FCA regulation, industry standards are set by the Equity Release Council (ERC). Equity release products must be safe and reliable, and recommended only when suited to a client\u2019s needs by a person qualified to advise on them.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h2 class=\"has-x-large-font-size\" id=\"this-mortgage-is-for-life-usually\"><strong>This mortgage is for life (usually)<\/strong><\/h2>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>Like an ordinary mortgage, a lifetime mortgage is secured against your home; you still own that and you or your beneficiaries can still gain from any increases in value, offset by interest accruals. The plan releases a percentage of your property\u2019s value as a lump sum. This may be a one-off payment, but drawdown schemes let you take an initial sum, followed by further amounts within a pre-set limit when needed.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>Interest is charged on the amounts you have received and the interest is compounded, so you don\u2019t make any monthly payments unless you select an interest-only lifetime mortgage. Most lifetime mortgages carry a fixed interest rate and although variable rate products are available, under ERC standards, they must be capped (have an upper limit) for the life of the mortgage.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>The sum you can borrow largely depends on your age and your property\u2019s value. You can normally borrow up to 60% of the value of your property. How much can be released is dependent on your age and the value of your property. If you survive for many years, rolled-up interest could mean your debt would overtake your property\u2019s value, but a \u2018no negative equity\u2019 guarantee is usually available and some schemes offer \u2018inheritance protection\u2019 to ensure the property\u2019s value can\u2019t be wiped out entirely. For a lifetime mortgage, you need to be 55 or older. The property must be your main residence, of standard construction, and worth at least \u00a370,000. Plans may be transferable to another suitable property if the lender agrees.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h3 class=\"has-large-font-size\"><strong>Lifetime mortgage drawbacks include:<\/strong><\/h3>\n<\/div>\n\n<div class=\"hd-block hd-block-list\">\n<ul><div class=\"hd-block hd-block-list-item\">\n<li>Usually the interest is added to what you owe and accumulates over the years, with interest accruing on the interest<\/li>\n<\/div>\n\n<div class=\"hd-block hd-block-list-item\">\n<li>If you decide to repay the plan early, there may be an early repayment charge<\/li>\n<\/div><\/ul>\n<\/div>\n\n<div class=\"hd-block hd-block-list\">\n<ul><div class=\"hd-block hd-block-list-item\">\n<li>When you die, the loan and any accrued interest will be paid off from the value of your home, reducing what your heirs receive (though it may also reduce any Inheritance Tax due on your estate).<\/li>\n<\/div><\/ul>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h2 class=\"has-x-large-font-size\" id=\"home-reversion-means-selling-a-stake-in-your-home\"><strong>Home reversion means selling a stake in your home<\/strong><\/h2>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>Home reversion involves selling all or a proportion of your home in return for cash, on the basis that you can continue living there rent-free, generally for the rest of your life. Home reversion plans aren\u2019t loans, so there\u2019s no interest accruing. However, if property prices rise, you only benefit according to the proportion you still own.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>For a home reversion plan, most lenders will require you to be at least 60 or 65. Your individual circumstances will determine how much equity you are able to sell to the plan provider. This could be 100% of your property. However, you will only receive a percentage of the market value of that portion, maybe only about 25% if you\u2019re at the younger end of the age range.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h3 class=\"has-large-font-size\"><strong>Home reversion drawbacks include:<\/strong><\/h3>\n<\/div>\n\n<div class=\"hd-block hd-block-list\">\n<ul><div class=\"hd-block hd-block-list-item\">\n<li>You\u2019ll get much less than the market value of the stake in your property that you part with, because of your right to continue living there whilst payday for the plan provider may be many years away<\/li>\n<\/div><\/ul>\n<\/div>\n\n<div class=\"hd-block hd-block-list\">\n<ul><div class=\"hd-block hd-block-list-item\">\n<li>If you die soon after starting a plan, you could have sold off (part of) your home at a fraction of market value, though some schemes make a rebate if you die within a certain time<\/li>\n<\/div><\/ul>\n<\/div>\n\n<div class=\"hd-block hd-block-list\">\n<ul><div class=\"hd-block hd-block-list-item\">\n<li>The government Money Advice Service states, \u2018<em>Home reversion plans are high-risk products. They could have major implications for tax, benefits, inheritance and your long-term financial planning.<\/em>\u2019<\/li>\n<\/div><\/ul>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h2 class=\"has-x-large-font-size\" id=\"equity-release-standards\"><strong>Equity release standards<\/strong><\/h2>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>Equity release advisers must be qualified by examination and ERC standards require plans to have the following features unless clearly stated otherwise:<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-list\">\n<ul><div class=\"hd-block hd-block-list-item\">\n<li>For lifetime mortgages the rate must be fixed for each release or, if variable, the rate must be capped for the life of the loan<\/li>\n<\/div><\/ul>\n<\/div>\n\n<div class=\"hd-block hd-block-list\">\n<ul><div class=\"hd-block hd-block-list-item\">\n<li>You must have the right to remain in your property for life or until you need to move into long-term care, provided the property remains your main residence and you abide by the terms and conditions of your contract<\/li>\n<\/div><\/ul>\n<\/div>\n\n<div class=\"hd-block hd-block-list\">\n<ul><div class=\"hd-block hd-block-list-item\">\n<li>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<\/li>\n<\/div><\/ul>\n<\/div>\n\n<div class=\"hd-block hd-block-list\">\n<ul><div class=\"hd-block hd-block-list-item\">\n<li>The product must have a \u2018<em>no negative equity guarantee<\/em>.\u2019 This means that when your property is sold, and agents\u2019 and solicitors\u2019 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<\/li>\n<\/div><\/ul>\n<\/div>\n\n<div class=\"hd-block hd-block-list\">\n<ul><div class=\"hd-block hd-block-list-item\">\n<li>All customers taking out new plans which meet the ERC standards must have the right to make penalty free payments, subject to lending criteria.<\/li>\n<\/div><\/ul>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>Professional advice is essential; equity release isn\u2019t the right solution for everyone.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>Releasing cash from your home reduces the value of your estate and the amount of inheritance you leave, so you should involve your children and dependants from the outset.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p><strong>To understand the features and risks, ask for a personalised illustration.<\/strong><\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p><sup>1<\/sup>ERC, Jan 2025<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p><strong>Equity Release \/ Lifetime Mortgages \/ Home Reversion Plan will reduce the value of your estate and can affect your eligibility for means tested benefits.<\/strong><strong><\/strong><\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h2 class=\"has-x-large-font-size\" id=\"top-tips\"><strong><u>TOP TIPS<\/u><\/strong><\/h2>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h3 class=\"has-large-font-size\"><strong>Consider all your options<\/strong><\/h3>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>Drawing up a budget will help you work out how much money you will need, and when you\u2019ll need it. That way, your equity release plan can be tailored to your requirements.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>If you are considering using equity release to pay off a mortgage, there may be other solutions that could work better for you, so it\u2019s important to get good advice. If you\u2019re looking to use the cash for home improvements, it\u2019s worth checking to see if you\u2019d qualify for a local authority grant.&nbsp;<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h3 class=\"has-large-font-size\"><strong>Discuss your plans with your family<\/strong><\/h3>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>Equity release is a potentially useful tool for raising money and can help bolster retirement income, pay for home improvements or provide money to pass on to other family members while you\u2019re still alive. As it will impact the amount of inheritance you leave to your family, it\u2019s a good idea to talk it over with them before going ahead.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h3 class=\"has-large-font-size\"><strong>Drawdown lifetime mortgages provide flexibility<\/strong><\/h3>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>The drawdown type of lifetime mortgage has risen in popularity, as it gives homeowners the freedom to take a lump sum secured against their property whilst leaving some in reserve for access later, as and when needed. This means they can opt to leave more of their equity intact to pass on to family as an inheritance. Interest accrues only on the money actually drawn down and on earlier interest.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h3 class=\"has-large-font-size\"><strong>A \u2018no negative equity\u2019 guarantee is a safeguard<\/strong><\/h3>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>The guarantee is that the loan plus the interest can never exceed the value of the property. So if you move into care or die, your dependants or beneficiaries won\u2019t be faced with extra debt.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h3 class=\"has-large-font-size\"><strong>A joint plan can protect your interests<\/strong><\/h3>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>A joint plan gives equal rights to either party to continue to live in a shared home if the other dies or needs to move into long-term care.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h3 class=\"has-large-font-size\"><strong>The plan with the lowest interest rate may not be the best<\/strong><\/h3>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>Plans come with a variety of features and benefits, and it\u2019s important that your plan meets your needs. For instance, some allow borrowers to make monthly interest payments to avoid the interest rolling up.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h3 class=\"has-large-font-size\"><strong>Understand the costs<\/strong><\/h3>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>These vary from one provider to another and may include a set-up or administration fee, solicitors\u2019 fees and, depending on the option you choose, surveyors\u2019 fees for carrying out a valuation of your home.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h3 class=\"has-large-font-size\"><strong>Your benefits may be affected<\/strong><\/h3>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>If you receive means-tested benefits, your entitlement to them could be affected if your circumstances change and your income or savings increase. Seek advice on how to release equity without affecting your benefits.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-heading\">\n<h3 class=\"has-large-font-size\"><strong>WE\u2019RE HERE TO HELP<\/strong><\/h3>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p>We\u2019re only a phone call away, so if you have any questions or would like to discuss any aspect of equity release, then please do get in touch.<\/p>\n<\/div>\n\n<div class=\"hd-block hd-block-paragraph\">\n<p><strong>It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. Some rules may vary in different parts of the UK.<\/strong> <strong>We cannot assume legal liability for any errors or omissions it might contain. No part of this document may be reproduced in any manner without prior permission.<\/strong><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>There are two main types of equity release: lifetime mortgages and home reversion plans Drawing up a budget will help you work out how much money you will need, and when you\u2019ll need it Plans come with a variety of features and benefits, and it\u2019s important that your plan meets your needs Contents Many people [&hellip;]<\/p>\n","protected":false},"author":19,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[32],"tags":[86],"hd_content_source":[],"_links":{"self":[{"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/posts\/6495"}],"collection":[{"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/comments?post=6495"}],"version-history":[{"count":2,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/posts\/6495\/revisions"}],"predecessor-version":[{"id":6498,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/posts\/6495\/revisions\/6498"}],"wp:attachment":[{"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/media?parent=6495"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/categories?post=6495"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/tags?post=6495"},{"taxonomy":"hd_content_source","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/quilter\/wp-json\/wp\/v2\/hd_content_source?post=6495"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}