What Is Equity Release?

Maria Elliot

Equity release is a type of financial product available to homeowners which allows them to access some of the equity they have built up in their home without having to make any monthly payments on the amount they borrow. This type of loan allows people to access a lump sum of money that can be used for any purpose, such as home improvements, to pay off debts, or to pay for medical or other expenses. Equity release can be beneficial for those who may want to access some of the equity that is tied up in their home but don’t want to take out a traditional loan.

It allows older homeowners to continue living in their homes, whilst releasing the equity by way of a lump sum or a series of sums.

It involves re-mortgaging your home without having to make mortgage payments during your lifetime. The lender takes a legal charge over the property and the mortgage is repaid upon your death. The final repayment will include the original loan sum and the rolled-up interest.

This has its disadvantages though.

Interest rates can be high, as can arrangement fees. Equity release will normally work on an interest-only basis.

Lenders often impose quite strict obligations on the homeowner, including the requirement to seek their consent if you wish to undertake structural renovations to your home. Letting out your property or taking in a lodger is not usually permitted.

Entitlement to state benefits, such as the state pension, can also be affected.

Equity release mortgages ultimately reduce the value of the property left to your estate upon death. For this reason, lenders require the homeowner to take independent legal advice together with financial advice.

Equity release offers an alternative to selling your home and downsizing, it may prove even more popular in years to come.

To speak with our lawyers about whether equity release is the right option for you contact expert property lawyer Maria Elliot. You can speak to Maria by calling us on 0207 485 8811 or fill in an online enquiry form.