How Does Equity Release Work?

What is equity release?

Equity release is the process of releasing money from your property when you’re still living there. 

If you own your home and are over 55, and looking for some extra cash or a more comfortable retirement, then one solution is to release some equity. However, equity release can be an expensive and risky way to raise money in your bank account.

Equity release is a great way to access the cash (equity) tied up in your home if you’re 55+ years old. To do this, you don’t need to have fully paid off your mortgage. 

How do you release your equity?

There are a few different ways you can release your equity, 1) release it in one sum, 2) release it in small amounts, known as a drawdown, or 3) a combination of the two. 

More specifically, there are two types of equity release schemes available: a lifetime mortgage and a home revision plan.

Lifetime Mortgage

This type of mortgage is a loan that is secured against your property and accrues interest. It is only paid off when you die or move into permanent care and the property is sold. There aren’t any monthly repayments to make and the money you get is tax-free. This means that the loan is paid off from the proceeds on the sale of the house.

However, you can choose a drawdown option on this type of mortgage. This means that you can access the funds, as and when needed, but pay interest on the money you have used.

Home Revision Plan

This plan is an agreement where you sell part of your house in return for a tax-free amount of money. Compared to the lifetime mortgage, no interest is applied and you get to live in your property rent-free for life or until you move into care. When this stage is reached, the plan provider receives payment based on the percentage of the property they own when the house is sold.

What are the benefits of equity release?

Releasing equity allows you to access tax-free cash that you can essentially use however you like. This could be used for home improvements or a retirement income boost to make life a little easier.

Things to be aware of:

  • The more you borrow, the more expensive it is as the interest has longer to compound
  • Speak advice from someone who’s a member of the Equity Release Council such as a mortgage broker or independent financial adviser
  • It can affect benefits that you may be entitled to, such as pension credit, universal credit and more

Contact Robin Mortgage Design

We hope you enjoyed this short article; if you would like to discuss your mortgage options further, then our team of professional mortgage advisers at Robin Mortgage Design would be happy to help. Give us a call on 0333 242 386, or you can fill out our online enquiry form, and we’d be happy to help.


Now it’s time for the legal bit: YOUR HOME BE REPOSSESSED IF YOU DO NOT KEEP UP TO DATE WITH YOUR MORTGAGE PAYMENTS

Robin Mortgage may charge a fee for arranging your mortgage, a typical fee would be £395.00 but could be up £1,495.00 depending on your circumstances.

The information in this blog is only valid for the date it is written.