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With nearly 42,000 equity release plans taken out in 2021, releasing a record £4.4 billion in property wealth, more and more people are looking to unlock the money tied up in their homes, but what are these schemes and who is eligible for them?

‘Equity’ in your home is the difference between the value of your home and any monies or loans that are secured against it (a mortgage or other loan). Equity release turns your ‘equity’ into money – it may be for your retirement; a world cruise you’ve dreamed of; home improvements; a new car; your children’s education or perhaps to help them get on the housing ladder. You are only eligible if you are a home owner aged 55 or over and the named legal owners of the property. You must have enough equity in the property and free of any defects that would affect your ability to obtain a mortgage.

There are advantages to equity release: you can receive a tax-free lump sum to spend, whilst retaining ownership of your property. However; the biggest disadvantage of entering into an equity release scheme is that it will decrease the monies available in your estate following your death.

There are two types of equity release schemes:

1. Lifetime mortgages, which are the most popular. With these, you can choose to either release equity from your home in a lump sum, or you can choose to ‘drawdown’ cash sums as and when you require them. There are no monthly repayments although some plans do allow the option to make payments if you want. If you do not make any repayments, the interest will build up over time and will become payable upon your death or when the property ceases to be your main residence.

2. Home reversion plans are much less common; in fact, they account for less than 1% of the market. Essentially, you sell a percentage of your property to the plan provider; in return, the provider pays you a lump sum or agreed instalments and provides you with the right to live in your property, rent-free, for the rest of your life. Upon your death, the property will be sold and the proceeds will be used to settle your equity release debt. Note you will have limited control over any future sale of the property.

One of the less common known facts about equity release is that often you can still downsize or move home in the future. Your lender will want to value your new home to check it is acceptable to them but, provided they are happy, you can transfer the loan to your new property. The loan is designed to run for your lifetime and therefore needs to be repaid from the sale proceeds upon death or when the property is no longer your primary residence, for example, you move into a care home.

If you are interested in equity release talk to an independent financial advisor regulated by the Financial Conduct Authority. If you decide its right for you will need to appoint a conveyancing professional who will explain the legal consequences of proceeding with the plan. Wilson Browne Solicitors offer fixed fees for Equity Release schemes with a highly experienced conveyancer who will have dealt with numerous schemes. Talk to us today by calling 0800 088 6004.