EQUITY RELEASE GUIDE
Equity release frequently asked questions
Equity release can involve important decisions about your home, finances and plans for later life. Here you can find answers to some of the questions people commonly ask about equity release and lifetime mortgages.
For more detailed information, you can also follow the links throughout this guide to our individual equity release guides.
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Start with the question that matters to you
You do not need to read this guide from beginning to end. The questions are grouped by topic so you can explore how equity release works, who may be eligible, potential costs and repayments, and some of the longer-term considerations.
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits and your tax position.
Understanding equity release
Equity release is a way for eligible homeowners to access some of the money tied up in their property without necessarily having to move home.
The most common form of equity release is a lifetime mortgage. Understanding how this works is a useful starting point before looking at eligibility, costs and the amount you may be able to release.
Your home
You own a property with equity in it.
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Lifetime mortgage
Borrowing is secured against your home while you retain ownership.
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Money released
You may be able to access some of your property wealth as money to use for your chosen purpose.
Common questions about how equity release works
What is equity release?
What is a lifetime mortgage?
Do I still own my home with a lifetime mortgage?
How is equity release different from selling my home?
Want to understand lifetime mortgages in more detail?
Our Lifetime Mortgages guide explains how they work, including interest, repayments, inheritance and some of the longer-term considerations.
Who can get equity release?
Whether equity release is available will depend on factors including your age, your property, any existing borrowing and the criteria of the lifetime mortgage provider.
Meeting basic eligibility criteria does not necessarily mean that equity release will be suitable for your circumstances.
Your age
Lifetime mortgages have minimum age requirements, which can vary between products and providers.
Your property
The property usually needs to meet requirements relating to factors such as its value, type, condition and location.
Existing borrowing
Any mortgage or other borrowing secured against your home will need to be considered when arranging equity release.
Who is applying
Eligibility can also depend on whether the lifetime mortgage is being arranged individually or jointly and the circumstances of the applicants.
Common questions about eligibility
How old do I need to be for equity release?
Can I get equity release if I still have a mortgage?
Can couples take out equity release together?
Does my property have to meet certain requirements?
Can health or lifestyle affect equity release?
Eligibility and suitability are not the same thing
You may meet the criteria for a lifetime mortgage without it necessarily being appropriate for your needs. An adviser will consider your wider circumstances, objectives and alternatives before making a recommendation.
How much equity can I release?
The amount you may be able to release through a lifetime mortgage will depend on your circumstances, your property and the criteria of the product and provider.
You do not necessarily have to borrow the maximum amount available, and the way you take the money can also affect how interest builds up over time.
YOUR AGE
Age can affect the amount available
The amount potentially available will usually be influenced by the age of the applicant or applicants.
YOUR PROPERTY
Property value matters
The value and characteristics of your home can affect the amount that may potentially be available.
EXISTING MORTGAGE
Existing borrowing is considered
Any mortgage or other borrowing secured against your home can affect how much of the money released would remain available to you.
PRODUCT CRITERIA
Criteria can vary
Different lifetime mortgage products and providers can have different lending criteria.
Common questions about how much you can release
How is the amount I can release calculated?
Does being older mean I may be able to release more?
Does the value of my home affect how much I can release?
Do I have to borrow the maximum amount available?
How does an existing mortgage affect the amount I receive?
Can I take the money in stages rather than all at once?
The maximum available and the amount you need are different questions
Borrowing more can affect the amount of interest charged and the equity remaining in your property. An adviser can consider how much you actually need as part of the wider recommendation.
How do interest, repayments and costs work?
A lifetime mortgage involves borrowing money secured against your home. Interest is charged on the amount borrowed, and there may also be other costs associated with arranging and maintaining the mortgage.
How the interest is dealt with, whether you make any payments and how you take the money can all affect the longer-term cost.
Money borrowed
The lifetime mortgage begins with the amount you choose to borrow.
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Interest charged
Interest is charged on the borrowing in accordance with the terms of the lifetime mortgage.
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Balance over time
If interest is added rather than paid, the mortgage balance can increase over time.
Common questions about interest, repayments and fees
How does interest work on a lifetime mortgage?
Do I have to make monthly repayments?
Can I pay the interest instead of adding it to the mortgage?
What is drawdown equity release?
What fees might I have to pay?
Can I repay a lifetime mortgage early?
What happens if I never make any repayments?
Small differences can matter over a long period
The amount borrowed, interest charged, length of time the mortgage remains outstanding and any repayments you make can all affect the eventual balance.
How does equity release affect my home and inheritance?
With a lifetime mortgage, you continue to own your home, but the borrowing is secured against it. The mortgage balance will generally need to be repaid when the relevant repayment event occurs.
Because the mortgage is normally repaid from the value of the property, equity release can reduce the amount of your estate that is ultimately available to leave to family or other beneficiaries.
YOUR HOME
You retain ownership
With a lifetime mortgage, you continue to own your home while the borrowing is secured against the property.
YOUR ESTATE
The equity remaining may be reduced
The mortgage and any interest owed will generally need to be repaid, which can reduce the value remaining in your estate.
Common questions about your home and inheritance
Will I still own my home?
Can I stay in my home for the rest of my life?
How does equity release affect my inheritance?
Can I protect some of my property value for my family?
What happens to the lifetime mortgage when I die?
What happens if I move permanently into long-term care?
What happens with a joint lifetime mortgage if one person dies?
PROTECTION
What is a no negative equity guarantee?
Lifetime mortgages that meet Equity Release Council standards include a no negative equity guarantee. Subject to the conditions of that guarantee being met, when the property is sold and the mortgage becomes repayable, the borrower or estate will not have to repay more than the property is sold for.
This protection does not mean that the value of your estate cannot be substantially reduced. It relates to the amount that must be repaid if the mortgage balance exceeds the sale proceeds.
Can I move home after taking equity release?
Taking out a lifetime mortgage does not necessarily mean you have to remain in the same property permanently.
Depending on the terms of your mortgage, you may be able to move home and transfer the lifetime mortgage to a new property, provided the new property meets the provider’s criteria.
CURRENT HOME
Your existing property
Your lifetime mortgage is secured against your existing property.
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MOVE HOME
Your proposed move
If you decide to move, the provider will need to consider the proposed new property.
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NEW PROPERTY
Your new property
The lifetime mortgage may potentially be transferred if the new property meets the relevant criteria.
Common questions about moving home
Can I move home with a lifetime mortgage?
Does my new property have to be approved?
What happens if I move to a cheaper home?
Could I have to repay the lifetime mortgage when I move?
Could there be an early repayment charge if I move?
Think about future housing plans before taking out equity release
If you think you may want to move or downsize in the future, this is worth discussing with your adviser before choosing a lifetime mortgage. Property criteria and repayment terms can affect your future options.
What can I use equity release for?
Money released through a lifetime mortgage can potentially be used for a range of purposes, depending on your circumstances and the terms of the mortgage.
The reason for releasing money should be considered alongside the cost of the borrowing, its effect on your future finances and whether other ways of meeting the same objective may be available.
Repaying a mortgage
Some homeowners consider equity release as a way of repaying an existing mortgage or other borrowing secured against their home.
Home improvements
Money may potentially be used for repairs, renovations, adaptations or other improvements to your home.
Helping family
Some people consider releasing money to provide financial help to children, grandchildren or other family members.
Retirement income
Equity release may be considered as one way of accessing additional money during retirement.
Major expenditure
Money released may potentially be used towards significant purchases or other planned expenditure.
Other purposes
There may be other reasons for accessing property wealth, depending on your needs and circumstances.
Common questions about using the money
Can I use equity release to repay my mortgage?
Can I use equity release for home improvements?
Can I use equity release to give money to my family?
Can I use equity release to help with a house deposit?
Can I use equity release to supplement my retirement income?
Are there restrictions on what I can spend the money on?
Consider the purpose and the borrowing separately
A worthwhile use for the money does not automatically mean that borrowing against your home is the most appropriate way to fund it. The objective, potential cost and alternatives should be considered together.
Explore guides for specific purposes
Equity release to repay a mortgage
Understand how equity release may potentially be used to repay an existing mortgage.
Read the guide
Equity release for home improvements
Explore using equity release to fund repairs, renovations or improvements.
Read the guide
Equity release to help family
Learn about using equity release to provide financial help to family.
Read the guide
Could equity release affect my benefits or tax?
Releasing money from your home can potentially affect other areas of your financial position.
In particular, holding additional money may affect entitlement to some means-tested benefits, while gifting money or making other financial arrangements can have separate tax and estate-planning considerations.
BENEFITS
Means-tested benefits
Money released and retained as savings or capital may potentially affect entitlement to benefits that take your financial resources into account.
TAX & ESTATE
Tax and estate considerations
How released money is used, invested or gifted can have separate tax and estate-planning implications.
Common questions about benefits and tax
Could equity release affect my means-tested benefits?
Does taking equity release create an Income Tax bill?
What if I invest the money I release?
Could giving released money to my family affect Inheritance Tax?
Could giving money away affect future care-cost assessments?
Should I get tax or benefits advice before taking equity release?
Consider the effect before releasing the money
Some consequences may depend not simply on taking out a lifetime mortgage, but on what you do with the money afterwards. Benefits, tax, gifting and estate-planning implications should be considered where relevant before you proceed.
Continue exploring equity release
What are the alternatives to equity release?
Equity release is not the only way to access money or change your financial position in later life.
Depending on what you are trying to achieve, alternatives might include using existing savings, moving home, changing other borrowing or adjusting the amount or timing of your plans.
Using savings or investments
Existing savings or investments might provide some or all of the money required without borrowing against your home.
Moving or downsizing
Selling your current home and moving to a lower-value property may potentially release money without taking out a lifetime mortgage.
Other borrowing options
Depending on your circumstances, other mortgage or borrowing arrangements may potentially be available.
Changing your plans
Reducing the amount required, delaying expenditure or providing financial help gradually may change how much money you need.
Common questions about alternatives
Should I use savings instead of equity release?
Could I downsize instead of taking equity release?
Are there other mortgages available to older borrowers?
Could family help instead?
How do I compare equity release with the alternatives?
Questions to compare
SOURCE
Where will the money come from?
COST
What could accessing the money cost?
FLEXIBILITY
Could you access money differently later?
LONG TERM
How could your future finances be affected?
The alternatives do not have to produce exactly the same outcome
For example, downsizing, borrowing less or changing the timing of your plans might provide a different amount of money but could still help you achieve the underlying objective.
Could I borrow less instead?
What happens if I want to explore equity release further?
If you are considering equity release, the next step is usually to discuss your circumstances and objectives with an adviser.
The adviser can explain the options that may be available, consider alternatives and provide regulated advice on whether a particular course of action is appropriate for you.
STEP 1
Your circumstances
The adviser will gather information about you, your property, finances, objectives and future plans.
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STEP 2
Explore your options
Your adviser can explain potential options, costs, implications and relevant alternatives.
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STEP 3
Regulated advice
If appropriate, the adviser can make a recommendation based on your individual circumstances.
Common questions about getting advice
Do I need advice before taking out equity release?
What will an equity release adviser ask me?
Will an adviser consider alternatives to equity release?
Does making an enquiry mean I have to proceed?
Does MortgageAdvice.co.uk provide the advice?
What happens after I submit an enquiry?
Making an enquiry does not commit you to proceeding
You can speak to an adviser, understand your options and decide what you want to do next. There is no obligation to take out an equity release product simply because you have made an enquiry.
GUIDE
Is equity release right for me? Questions to consider before speaking to an adviser.
GUIDE
Lifetime mortgages explained Understand how the most common form of equity release works.
GUIDE
Alternatives to equity release Explore other ways you may be able to achieve your financial objective.
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Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits and your tax position.
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