What is equity release: how they work?

by Vidit Agarwal Marketing Director

Equity release schemes

Equity release scheme in UK’s fastest growing financial scheme and popular in recent years. Equity release schemes allows individuals aged 55 and over to access your property's value for more cash in retirement – but equity release is an expensive, lifetime, commitment.

Types of Equity release options: There are two types of equity release; Lifetime Mortgages and Home Reversion. Both of these equity releases are regulated by FCA (Financial Conduct Authority).

Lifetime Mortgages: Like a traditional plan this is a secured loan against your property. Under this plan you will get a loan secured on your property provided it is your main residence which is a tax free amount. The entire amount and any accrued interest are paid back when you pass away or when you have shift into long-term care.

Home Reversion: This plan is not popular but still few of the population are interested; by this scheme you usually sell a portion of your property to the plan provider for less than the market value and will pay you a tax-free lump sum in return.

Equity release can play a crucial role in retirement funding if you want some extra amount and don’t want to move your property. The Equity release schemes built with the Equity Release Council product standards to tap safely in to housing wealth scheme without having to worry about making monthly repayments.

However, if you are thinking of taking out an equity release, you should take financial advice from an experienced financial adviser and FAQs are: