EQUITY RELEASE
Speak to an equity release adviser
No obligation to proceed.
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits and your tax position.
What are the pros and cons of equity release?
There is no single answer to whether equity release is a good or bad option. Its advantages and disadvantages depend on your circumstances, what you want to achieve and the alternatives available to you.
Potential advantages
Access money tied up in your home
You can usually remain in your home
Conventional monthly mortgage repayments are not normally required
Some products allow voluntary repayments
Money may be taken as a lump sum or, with some products, in stages
Potential disadvantages
Interest can increase the amount owed over time
It will reduce the equity remaining in your home
It can reduce the value of your estate
It may affect entitlement to means-tested benefits and your tax position
Repaying the mortgage early may result in charges
Potential advantages in more detail
Depending on your circumstances and the product selected, equity release can offer a number of features that may be useful.
Access money without necessarily moving home
Eligible homeowners may be able to access some of the value tied up in their property while continuing to live there, subject to the terms and conditions of the plan.
No conventional monthly repayments required
Lifetime mortgages generally do not require conventional monthly mortgage repayments. If interest is not paid, however, it will normally be added to the outstanding balance.
Flexibility over how money is taken
Depending on the product, money may be taken as a single lump sum or through a drawdown facility that allows further amounts to be taken later.
Some products allow repayments
Some lifetime mortgages allow voluntary repayments or interest payments, subject to the terms of the product.
Money can be used for different purposes
Examples may include repaying an existing mortgage, home improvements, supplementing retirement income, helping family financially, or significant purchases or expenditure.
Potential disadvantages in more detail
Equity release can also have significant long-term implications that should be understood before proceeding.
Interest can build up
Where interest is added to a lifetime mortgage rather than paid, the outstanding balance can increase over time because interest may also be charged on previously added interest.
Less equity may remain in your home
The outstanding borrowing and accumulated interest reduce the equity remaining in the property.
Your estate may be worth less
A larger outstanding mortgage balance can reduce the amount ultimately available from the property to your beneficiaries.
Benefits and tax can be affected
Receiving or retaining released money may affect entitlement to some means-tested benefits and could have tax implications depending on your circumstances.
Early repayment charges may apply
Some lifetime mortgages may have early repayment charges if you repay some or all of the borrowing early. The terms vary between products.
Future options may be affected
Using some of the equity in your property now may affect the financial choices available to you later in retirement.
What happens to your inheritance?
Taking equity from your home reduces the amount of property equity remaining. If interest is added to a lifetime mortgage, the outstanding balance can also increase over time.
This does not necessarily mean that no inheritance will remain. The eventual effect will depend on factors including the value of the property, the amount borrowed, interest and how long the lifetime mortgage remains outstanding.
If leaving a particular amount to beneficiaries is important to you, discuss this with your adviser before proceeding.
Property value
The value of your home at that time.
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Lifetime mortgage balance
The amount borrowed plus any interest added to the loan.
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Remaining property equity
The property equity remaining before any other relevant costs or liabilities.
Could equity release affect your benefits or tax?
Releasing money from your home can have wider financial implications depending on your circumstances and what you do with the money.
Means-tested benefits
Receiving or retaining money released from your home could potentially affect eligibility for some means-tested benefits, depending on your circumstances.
Tax
Money released from the value of your home is not normally treated in the same way as taxable income. However, how the money is subsequently used or invested may have tax consequences.
Consider the wider implications
An adviser can help you identify areas that may need to be considered, and specialist tax or benefits advice may be appropriate where necessary.
What if you want to move home?
Moving home may be possible with some lifetime mortgages, but it will depend on the terms of the product and whether the new property meets the provider’s criteria.
01
You decide to move
You decide that you want to sell your existing home and move.
02
The new property is assessed
The provider considers whether the new property meets its lending criteria.
03
The mortgage is reviewed
The lifetime mortgage may be transferable, or some or all of the borrowing may need to be repaid depending on the circumstances.
Think about your future housing needs
Understanding the rules around moving home can be important if you expect your housing needs to change later in retirement.
What if your circumstances change?
A lifetime mortgage can potentially remain in place for many years, so it is worth considering how your circumstances might change in the future.
Moving home
Consider what would happen if you later wanted or needed to move.
Entering long-term care
Understand what the product terms say about moving permanently into long-term care.
Wanting to repay early
Check whether early repayment charges could apply if you later wanted to repay the borrowing.
Needing more money later
Consider whether taking money now could affect the options available if you need additional funds in the future.
Think beyond your immediate needs
When considering equity release, it can be useful to think about how your finances, housing needs and personal circumstances might change over the years ahead.
Alternatives to equity release
Equity release is not the only way to access money or manage borrowing in later life. Depending on your circumstances, other options may be worth considering.
Downsizing or moving home — Selling your current home and moving to a less expensive property could potentially release money without taking out a lifetime mortgage.
Using savings or investments — If you have other assets available, you could consider whether using some of these may help meet your objectives instead of borrowing against your home.
Other mortgage or later-life lending options — Depending on your income, age and circumstances, other forms of mortgage borrowing may potentially be available.
Repaying or restructuring existing borrowing — If an existing mortgage or other borrowing is driving the need for equity release, it may be worth considering whether that borrowing could be repaid or structured differently.
Arrangements with family — In some circumstances, financial support or arrangements involving family members may be worth exploring, although the financial and legal implications should be considered carefully.
Compare the alternatives
The right approach will depend on what you want to achieve, your finances and your wider circumstances. An adviser can help you consider equity release alongside other options that may be available.
Questions to consider before proceeding
Before deciding whether to proceed, consider both what you want to achieve now and how the decision could affect you later.
Why do I want to release money from my home?
How much do I actually need?
Could I achieve the same objective another way?
How could the borrowing affect my finances later in retirement?
How important is preserving an inheritance?
Could my entitlement to means-tested benefits be affected?
What happens if I want to move?
Can I make repayments?
What early repayment charges could apply?
What happens if I need additional money later?
You don’t need to have all the answers
These are some of the areas an equity release adviser can discuss with you when considering your circumstances and the options that may be available.
Frequently asked questions
Common questions about the potential benefits, drawbacks and implications of equity release.
Is equity release a good idea?
What is the main disadvantage of equity release?
What are the potential benefits of equity release?
Will equity release affect my inheritance?
Can I repay equity release early?
Can I move home after taking equity release?
Could equity release affect my benefits?
Do I pay tax on money released from my home?
Do I have to make monthly repayments?
What alternatives should I consider before equity release?
Continue exploring equity release
Is equity release right for me?
Questions to consider before speaking to an adviser.
Read guide →
Alternatives to equity release
Explore other ways you may be able to achieve your financial objective.
Read guide →
Equity release costs & fees
Understand interest, fees and how borrowing can change over time.
Read guide →
Explore our other guides to understand how equity release works, how much may be available and the costs involved.
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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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