Equity release

If you’re retired and living on your pension you may be considering equity release as a way of getting cash from the value of your home. Find out how it works.

If you own your own home and are 55 or over, you may be thinking about equity release because it could provide you with a lump sum, additional income or maybe both.

In this section, you’ll find out how equity release schemes work and what you might think about before starting one.

Before considering equity release

It’s important to check whether there are other ways you could meet your financial needs before choosing an equity release scheme. Some ways might be to:

• Claim any benefits you might be entitled to.

• Check to see if your local authority can help you to pay for essential home improvements – see Related links;

• Trace any pensions you may have lost track of, using the Pension Tracing Service.

• Use your savings or sell your investments first, but consider getting advice before doing so – see Related information; and/or

• Sell up and buy somewhere smaller and cheaper (downsize).

What is equity release?

Equity release describes a range of products only available to you if you are older, typically over the age of 55. They allow you to release the equity (cash) tied up in your home. The products have no fixed term and allow you to stay in your home for the rest of your life, unless you have to move into long term care.

These schemes can be helpful in certain circumstances but are not suitable for everyone. For example, they can be expensive and inflexible if your circumstances change in the future and may affect your current or future entitlement to State or local authority benefits.

When considering equity release, you may come across sale and rent back schemes.

Watch out as they are not a type of equity release.

How does it work?

You can either borrow money which is secured against your home, or sell part or your entire home. This can give you a lump sum, a way of topping up your income, or both.

You are more likely to qualify for an equity release scheme if you have no current mortgage, or if any mortgage you have is relatively small.