Equity release is a way to access the money tied up in your home without having to sell or move out. It allows homeowners, typically aged 55 or older, to unlock some of their home's value as cash. There are two main types of equity release: lifetime mortgages and home reversion plans. A lifetime mortgage is a long-term loan secured against your home. You receive a lump sum or instalments and live in your home as usual. No monthly repayments are needed; instead, interest accumulates on the loan and is repaid when you die or move into long-term care, usually by selling the home. This means your equity in the property reduces over time and the inheritance left may be lower. A home reversion plan involves selling part or all of your home to a provider in exchange for a lump sum or regular income while retaining the right to live there rent-free. When the home is eventually sold, the provider receives their share of the sale proceeds according to how much of the property they own. Equity release is not a loan with interest in the traditional sense but involves fees and the eventual reduction of your home equity. It can have impacts on benefits entitlement and inheritance, so professional financial advice is recommended before proceeding. The home is generally sold at the end of the agreement to repay the funds, with any remaining value going to you or your estate.
In sum, equity release works by unlocking the financial value in your home without requiring you to move, providing cash now while paying back with your home's value later.
