Equity Release
IntermediateEquity release is a way for older homeowners to access money tied up in their home without selling it or moving out, either by taking a loan secured against the home or by selling part of it to a provider.
Equity release is a term used mainly in the United Kingdom. There are two main types.
A lifetime mortgage is a loan secured against the home, with interest usually added to the loan rather than paid monthly. The loan is repaid when the homeowner dies or moves into long-term care, usually from the sale of the home. In the UK, lifetime mortgages are generally available from age 55.
A home reversion plan involves selling all or part of the home to a provider, usually for less than its market value, in return for a lump sum or regular payments and the right to live there rent-free for life.
For example, a 72-year-old homeowner might take a lifetime mortgage of 60,000 on a home worth 350,000 to pay for home improvements and help family members.
Because interest compounds, the debt can grow quickly, reducing what is left for heirs. Equity release can also affect means-tested benefits. Plans meeting Equity Release Council standards include a no-negative-equity guarantee. Regulated advice is required before taking out equity release in the UK.
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