Equity release refers to financial products deigned for homeowners aged 55 and above to unlock some of the equity tied up in their property without needing to sell it. Two primary methods for equity release are lifetime mortgages and home reversion plans.

Lifetime Mortgages: This is the most common form of equity release. With a lifetime mortgage, homeowners borrow against the value of their home while retaining ownership. The borrowed amount, plus interest, is repaid when the property is sold, typically upon the homeowner’s death or relocation to long-term care. There are various types of lifetime mortgages, including roll-up, interest-only, and drawdown plans, offering flexibility in how funds are accessed and managed.

Home Reversion Plans: In contrast to lifetime mortgages, home reversion plans involve selling a portion or all of the property to a provider in exchange for a lump sum or regular payments. The homeowners retain the right to live in the property rent-free until they pass away or move into permanent care. Upon the sale of the property, the provider receives their share of the proceeds based on the agreed-upon percentage.

Both options have implications for inheritance and can affect entitlement to means-tested benefits, so it’s crucial for homeowners to seek financial advice before committing to any equity release scheme.

Equity release, lifetime mortgage and home reversion plans will reduce the value of your estate and can affect your eligibility for means-tested benefits.

A financial adviser is invaluable when exploring equity release options due to the complexity and long-term implications of these financial products. They provide personalised guidance to individual circumstances, ensuring homeowners fully understand the risks, benefits, and alternatives. Advisers assess the suitability of equity release about the homeowner’s financial goals, retirement plans, and potential impacts on inheritance and benefits eligibility. Their expertise helps navigate the intricate terms and conditions of different schemes, ensuring homeowners make informed decisions that align with their best interests and financial well-being.