Equity release schemes

People are increasingly looking at ways to release the money locked up in the value of their home to improve their finances in retirement.

One option is an equity release plan or scheme which allows property owners to cash in on a home’s value without selling or trading down to a cheaper property.

There are two main types of equity release schemes:

• lifetime mortgage
• home reversion

A lifetime mortgage is different to an ordinary mortgage in that you do not have to make monthly payments. Instead, the capital and interest is rolled up, and is repaid to the lender only in the event of death, or a transfer into long-term care. You may opt to receive a lump sum payment or small regular sums. 

A home reversion scheme is where you sell part of your property to the lender for an agreed price. The lender then allows you to remain in the property rent free. When the property is eventually sold, the lender will recover what they have lent with interest.

Equity release schemes are regulated by the Financial Services Authority (FSA). There are a number of schemes available.

Before you decide whether to enter into such a scheme you should take the advice of an Independent Financial Adviser who will be able to provide clear and professional advice.