How does equity release work?

There are two main types of equity release scheme:

Lifetime mortgages (LTMs):

These involve taking out a mortgage where there are no repayments to be made. Instead, the interest on the amount borrowed is “rolled up” on a compound basis and added to the outstanding loan. When the property is eventually sold, the total amount owed including the interest is repaid. You, or your estate, then receive the remainder of the sale proceeds (please click here to view pros and cons of LTMs).

Home reversion plans:

These involve selling all or part of your property at a discount to its market value to a specialist company in return for a tax free cash lump sum (or series of payments) and the right for you and your spouse to remain in the property, rent free, for life. At the end of the plan, you or your estate will be entitled to a proportion of the net sale proceeds equivalent to the share in the property which has not previously been sold (please click here to pros and cons of HR's).

Which type of scheme is best for you?

Choosing the most suitable scheme will depend upon a number of considerations including:

• How much money you need
• Whether you need a cash lump sum or a regular drawdown
• The value of your property and other assets
• What benefits you currently receive
• Your age(s) and health
• Your attitude to risk
• How much, if any, you would like to leave as an inheritance

This may involve a home reversion plan or lifetime mortgage. To understand the features and risks, request a personalised illustration here.

Alternatively, please call our Enquiry Centre free on 0800 253657.