Equity Release

Equity Release

The 'equity' or value in your property can be released to provide either a lump sum or a regular income. There are two types of equity release: lifetime mortgages and home reversions.

Lifetime mortgages

This means you take out a loan secured against the property. The loan is repaid from the proceeds of the sale of your home if you move out or when you die. You still own the house and can live there for as long as you like. You can cancel or change a lifetime mortgage, but you may incur charges for doing so.

Home reversions

This means you sell all or part of your property to a reversion company or an individual. They own all or part of the property. You receive money in return and can live in the property for as long as you like. You cannot cancel a home reversion.

Essentially equity release is a type of loan, but can be very specialised and will potentially affect all who have an interest in the property. It is therefore very important that before taking any action you discuss it thoroughly with an independent financial adviser, solicitor or mortgage adviser who is experienced in dealing with equity release. You should also discuss it with your spouse, children and any others with an interest in the property who might be affected now and in the future.

Areas to consider include:

Further information

The FSA has published a guide to help you understand how equity release works and the possible risks involved. They also suggest alternatives if equity release is not suitable for you. Visit:
www.moneymadeclear.fsa.gov.uk/pdfs/raise_home.pdf

You can obtain a paper copy by telephoning The Financial Services Authority (FSA) on 0845 606 1234 and asking for a copy of their 'Factsheet: Raising Money from Your Home'.