Equity release FAQs

As UK house prices continues to increase so too has homeowner confidence as a record number turn to equity release to fund their life plans. We look at the most frequently asked questions on equity release to help you better understand the increasingly popular retirement planning tool.

What is equity release?

Your equity is calculated as the difference between your property’s value and any outstanding debts or secured loans such as a mortgage. Equity release is an innovative financial tool that allows homeowners aged 55 or over to access some of their property’s equity, tax-free, to spend as needed.

What types of equity release are there?

Generally there are three main ways to release equity from your property, namely a Lifetime Mortgage, Downsizing, and a Home Reversion Plan. Downsizing is moving to a cheaper home and keeping the difference in value to spend as you need whereas a Home Reversion Plan involves selling a portion of your home meaning you can continue to live there, although you will not be the full owner.

What is a Lifetime Mortgage?

The most common way to release equity is through a Lifetime Mortgage which ensures that you remain the full owner of your home for life so no need to sell or move. There is no need to make monthly payments with a Lifetime Mortgage unless you choose to and there is the option to guarantee an inheritance and place some funds in a reserve account to withdraw from when needed.

How does equity release work?

Equity release is used for many reasons including to pay off an existing mortgage, to renovate your home, to take a holiday, to gift to family, or to supplement an income. The process involves an advice service in which a specialist adviser is allocated to you to discuss your needs and find a suitable solution.  All initial advice is free so you can find out about your eligibility with no pressure to proceed further. The adviser you’re given will explore all of the alternatives to equity release to ensure this is the right route for you and it is clearly explained that as you are using equity from your property now, it will reduce your estate later on.

Will I face any problems with equity release?

Common concerns with equity release can include fears of repossession of a property or of the total amount repayable becoming more than the home’s value, however this is not relevant with a Lifetime Mortgage as plans approved by the Equity Release Council have in-built safeguards to protect consumers specifically from this. As equity release involves increasing the money you have readily available, it is possible that your benefits could be affected, however, pensions and disability allowance are not affected. Your adviser will conduct a full benefits eligibility check and inform you if equity release will affect your entitlement.

How do I calculate how much equity I can release?

A specially designed equity release calculator like the one below will do all of the work for you and calculate how much you can release based on your age, property value and the interest rates available.

Whether you're curious as to how much you can release, or you want to take the initial steps towards releasing equity, our handy calculator will give you the information you require.

You can also contact us on 0800 029 1233 to discuss your needs with a view to arranging a no obligation face-to-face home visit with one of our financial advisers.

The Flexible Lifetime Mortgage is by leading insurer Aviva and is only available through qualified financial advisers such as those working with the Reader’s Digest Equity Release Service.

*(Equity Release Council Lending Figures Q3 2010 – Q3 2015)

Reader's Digest Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (http://www.fsa.gov.uk/register/home.do) under reference 610205. In using this website I give express consent to Responsible Life Limited to contact me on the details provided from time to time. Calls may be recorded for training and quality purposes. This is a Lifetime mortgage which may reduce the value of your estate and may affect your entitlement to state benefits. To understand the features and risks ask for a personalised illustration. Any information contained herein is a personal opinion of the author and should not be considered to be advice of any kind. Inheritance Tax planning is not regulated by the FCA. Think carefully before securing other debts against your home. By consolidating your debts into a mortgage you may be required to pay more over the entire term than you would with your existing debt. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,295. Our adviser will talk through the setting up costs of a lifetime mortgage before you make any decision to proceed.