An Essential Guide to Equity Release
6 December 2018 • Equity release insights
At its most simple, over 55 equity release is lending for older people. Equity release frees up some of the capital in your home, so you can stay in it, without you having to sell it and downsize or move elsewhere.
Who is equity release for?
Equity release schemes were created as an alternative form of lending as most conventional mortgages are not offered to people over a certain age. We’re called 55+ Equity Release as most schemes are available for people aged 55 or more, although some equity release schemes are only open to people aged 60 and over.
To be eligible for over 55 equity release schemes, you either need to own your own home or have only a small outstanding mortgage (which must be repaid from the cash released).
How do equity release schemes work?
Over 55 equity release schemes either give you a lump-sum payment or staged payments, for example regular monthly payments. How you receive the wealth you release from your property is up to you and will depend upon what you want to do with it; if you want to go on a holiday of a lifetime, you will want a lump sum, but if you want help with regular bills, monthly payments are likely to be more appropriate.
Receiving smaller sums regularly has the advantage of reducing the interest on the overall loan. You can also take a combination of a lump sum followed by regular payments.
What different types of equity release schemes are there?
There are two main types of over 55 equity release schemes:
A lifetime mortgage, also known as a roll-up mortgage, is a loan against the value of your home. No capital or interest payments are made until the property is sold; instead, the interest is rolled up and added to the total amount of the loan.
Home Reversion Schemes
With a Home reversion Scheme, you sell part or all of your home to a reversion company. You will agree exactly how much of your home you are selling, and how much is ring-fenced for your use later, possibly in your Will; this proportion will not change unless you decide to release more equity. When the property is sold, the proceeds are shared according to the proportions of ownership.
Most people who apply for over 55 equity release schemes have never done it before. We take care to talk you through each stage of the process, making sure you understand at all times, so you can make an informed decision as to whether it is right for you.