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What is equity release on a house?

Discover more about exactly what equity release on a house is

If you are looking to release funds and you are over the age of 55, you may have come across equity release during your search.

Who is equity release for?

Specific to homeowners, and popular with those at pension age, equity release lets you take out a tax-free lump sum based on the value of your home, less any secured debt, for you to use however you wish. It works by taking into account that as property prices rise, the mortgage amount is less than the market value so there is cash equity tied up in the property. Equity release can be suited to those at retirement age who are unable to generate cash to spend any number of ways.

How does equity release work?

Equity release involves taking the value of your home at present, and calculating how much equity you could release now, either via a lump sum or a number of smaller payments. Just as with a standard loan, interest is accrued with equity release, but is payable when you sell your home to move into residential care, or when you pass away. Many people are reassured by the fact that there is no requirment to make monthly repayments, and that you do not have to sell your home. You can enjoy living there for as long as you are able to without the upheaval of moving.

Consider the interest rates

Like any loans, there is interest accrued which needs to be taken into account when considering this type of borrowing. Equity release uses compound interest which does build over time. You also need to factor in any lender or broker fees that will be payable taken by the lender or your solicitor.

A reassuring ‘no negative equity’ guarantee

Rest reassured that you are protected against negative equity. Negative equity occurs when the value of your home has dropped so that you owe more against it by way of a mortgage than the property is worth. If you decide equity release is for you, the value of the loan will never be more than the value of the property. That way, you as the borrower are protected, and do not need to worry about your children being burdened with any of your debt from the equity release when you pass away.

How to discover more

Fill in our quick equity release calculator and see how much cash you could release from your home. Or get in touch with one of our partners for more information.

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