Should You Equity-Release?

What Is Equity Release?

Equity release is, in a nutshell, a way to unlock the value of your property and turn it into a cash lump sum. You can do this via a number of policies which let you access – or 'release' – the equity (cash) tied up in your home, if you're 55+. You don’t need to have fully paid off your mortgage to do this.

As a rule, you can take the money you release in one lump sum, in several smaller amounts on which you'll pay interest, or as a combination of both.

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Is Equity Release A Good Idea For Me In 2021?

Equity release lets you release money tied up in your home, giving you a cash sum to use as you wish. So, if you’re considering home or garden improvements, looking to help family financially, planning a luxury holiday or want additional retirement income in 2021, releasing equity could be a good idea.

Releasing equity lets you unlock tax free cash from your home, without having to move house or worry about monthly repayments. However, releasing equity may not be a good idea if you don’t like the idea of your family’s inheritance being affected.

Having said that, there are equity release schemes that allow you to protect a percentage of the value of your property therefore guaranteeing an inheritance, which is why it’s important to seek advice from professionals.

What Are The Different Types Of Equity Release?

The two popular types of equity release are

• Lifetime mortgage
• Home reversion

Lifetime Mortgage

This is the most popular type of equity release. You borrow a lump sum in the form of a mortgage, which is eventually repaid from the sale of your home either when you die or move into long-term care. The amount you can borrow is usually between 18 per cent and 50 per cent of the property’s total value – typically the older you are, the more you can release.

Home Reversion

With a home reversion scheme, you sell all or part of your property, but with a legal right to continue living in it until you die or move into long-term care. The money can be paid to you either as a lump sum or as a regular income, whichever you prefer.