Get Your Financial Freedom from Equity Release 4U: What is it and how does it work?

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Jane Taylor in Saving Money

Last updated: 15 June 2020, 08:41 GMT

Equity Release is a way to access some of the money tied up in the value of your home if you are over the age of 55. You can release the money as a lump sum or in installments.

There are different plans that allow you to release this cash, either by taking out a loan secured against your home or by selling part or all of it. The two main types are lifetime mortgages (the most popular option) and home reversions schemes.

Some of the reasons people look at equity release are to live comfortably in retirement, fund home improvements or to help a family member with a cash gift.

How does equity release work?

To be eligible for an equity release plan, you’ll need to be a UK homeowner of a qualifying property and be age 55 or over.

Depending on the plan, you can release the money as a lump sum or in smaller installments, and it’s up to you how you spend it.

The money you release will need to pay off any outstanding mortgage first. The rest is yours to spend as you wish, for example on home improvements or to help your family.

It’s a tax-free sum you can use however you like.

Once you’ve accessed your money you won’t have to make any monthly repayments. If you’d like to pay off the interest of the loan monthly, some plans offer this option.

With the most popular form of equity release, the outstanding loan (plus interest if unpaid) will be paid back when you sell your house – which will usually be when you pass away or move out permanently (into residential care).

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How long does equity release take?

Releasing equity takes on average around 8-12 weeks. Choosing a specialist equity release solicitor can help ensure your application runs smoothly and your money is in your bank account as soon as possible.

Be sure to keep this timeframe in mind if you’re planning on making any purchases.


There are two main ways to release the equity tied up in your home without having to move.

Lifetime mortgage - the most popular equity release scheme, where you borrow money against the value of your home.

A lifetime mortgage is a loan for an agreed amount of tax-free money secured against your home. It is available to UK homeowners aged 55 and over. You continue to own the property and don’t need to make monthly repayments.

Instead the money you borrow, and any interest accrued, is paid back when you die or go into residential care. If there is any money left over once the loan has been repaid, this will go to your estate.

Home reversion scheme - where you sell all or part of your property in exchange for money. It lets you sell part or all of your home in return for a tax-free lump sum or a regular income. It is available to homeowners aged 65 and over.

The price the scheme provider pays is below market value because you also get the right to stay in your home. You can live there rent-free until you die or move out permanently.

When this happens, your home will be sold and you or your estate will receive the value of your share. This will be the amount your home sold for minus the share you sold to the equity release provider originally. You’ll also need to check with your particular plan provider if there are any fees or charges when your house is sold.

This means you’ll know exactly what percentage of your home’s value will be left to your estate on your death.

An expert adviser will be able to help you decide which type of equity release scheme suits you best and how much you could release.

Is equity release right for me?

If you have money tied up in your home, and you’re looking for a way to fund a more comfortable retirement, equity release could be a way to boost your finances.

It could help top up your pension or other income when you stop working – and you can use the money to maintain or enhance your lifestyle in later life.

You’ll need to meet certain conditions in order to qualify for equity release plans. If you meet the criteria below, then you could be eligible.

  • You're 55 or over
  • You're the owner of a qualifying property in the UK
  • Your property is worth £70,000 or more

If you have enough spare cash or other investments that will allow you to maintain your lifestyle or other spending goals in retirement, then equity release is less likely to be right for you.

Getting advice

Equity release is a financial commitment related to your home, so it’s a big decision. As well as providing a roof over your head, it’s also a valuable asset and may form a significant part of your estate.

There’s a lot to consider, so it’s important to get professional advice. This can be from a specialist adviser, a solicitor or both to help you decide if it’s the right option for you.

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