Equity Release FAQs
Thinking about unlocking cash from your home but not sure how equity release works—or if it’s right for you? We’ve answered the most common questions about equity release, including how it affects your home, inheritance, and benefits, so you can make an informed decision with confidence.
Equity Release: FAQs
A look at some of the most common equity release terms and FAQs.
What is 'equity release'?
Equity release allows homeowners aged 55 and over to access the wealth tied up in their property without moving. It can provide a lump sum or regular income, making it useful for boosting retirement income, funding home improvements, or helping family members financially. All products must be advised sales under Financial Conduct Authority (FCA) regulations, meaning a qualified adviser will explore all available options and recommend a plan tailored to your needs.
What are the different types of equity release?
The two main types of equity release are Lifetime Mortgages and Home Reversion Plans. Both are regulated by the Financial Conduct Authority. Lifetime Mortgages let you borrow against your home while retaining ownership, whereas Home Reversion Plans involve selling part or all of your property in exchange for a cash lump sum. We specialise in Lifetime Mortgages at Need Financial Planning.
What is a 'Lifetime Mortgage'?
A Lifetime Mortgage is a loan secured against your home that allows you to release cash while keeping ownership. The loan, plus rolled-up interest, is repaid when you pass away or move into long-term care. You don’t need to make monthly repayments, but you can choose to pay interest voluntarily to reduce costs. You can take the money as a tax-free lump sum or smaller regular payments, with some plans allowing additional borrowing later
Interest Roll Up Explained:
With a mainstream mortgage customers pay the interest due on a monthly basis. With a lifetime mortgage, the interest due is simply added to the mortgage account. This means that interest accrues over the term of the mortgage and can significantly impact on the amount owed over time.
Many lifetime mortgages now have a facility to allow payments to be made, which can alleviate this impact. This facility has been written into the Council’s Product Standards, so it must be included in all new products coming to market that providers wish to be Equity Release Council compliant.
What is a 'Home Reversion Plan'?
A Home Reversion Plan lets you sell part or all of your home in exchange for a tax-free lump sum while continuing to live there rent-free for life. At the end of the plan, the property is sold, and proceeds are divided according to ownership shares. We do not offer Home Reversion Plan services at Need Financial Planning.
Who can apply for equity release?
You must be at least 55 years old, own a UK property worth at least £70,000, and meet the lender’s criteria, which may include property type, condition, and credit history.
How much can I borrow with equity release?
The amount you can borrow depends mainly on your age (or the youngest applicant’s age for joint applications), your property value, and the chosen plan. Some lenders also consider health and lifestyle factors, which can increase the amount available.
Equity Release Calculator:
Have a look at our equity release calculator to get an idea of how much you may be able to borrow.
What are the alternatives to equity release?
Alternatives include downsizing, using savings or investments, taking a Retirement Interest-Only (RIO) mortgage, or checking eligibility for government benefits. These options should be considered before proceeding with equity release.
Can I take out equity release if I already have a mortgage?
Yes, but you must first repay your existing mortgage with the funds released. Any remaining money can then be used as you wish
Will I be able to move home if I've taken out an equity release loan?
Most Lifetime Mortgages allow you to transfer (port) the loan to a new property, provided it meets the lender’s criteria. There may be costs involved, such as valuation fees, legal costs, and potential early repayment charges if you do not port the loan.
What are the risks of equity release?
The main risks include reduced inheritance, interest roll-up increasing the debt over time, potential impact on means-tested benefits, and early repayment charges. However, all plans approved by the Equity Release Council include a no-negative equity guarantee.
Could equity release affect my benefit entitlement?
Yes, releasing equity may affect means-tested benefits such as Pension Credit or Council Tax Reduction. Your adviser should review this with you before you proceed.
Can you repay an equity release loan early?
Yes, but early repayment charges may apply. Check your plan’s terms and speak to your provider before making a decision.
What is the Equity Release Council?
The Equity Release Council is the industry body that sets consumer protection standards. As members, we follow its strict code of conduct to ensure ethical advice and safe products for clients.
Keen to Learn More about Equity Release?
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IMPORTANT: With investments, your capital is at risk. Pensions and investments can go down in value as well as up, so you could get back less than you invest.
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