How does Equity Release work
There are two different types of Equity Release, with the most common type these days being the Lifetime Mortgage.
A Lifetime Mortgage (or Equity Release mortgage) is a specialised loan that is secured against your home, allowing you to take advantage of your property’s value. In many ways it is very similar to a regular residential mortgage that you have likely taken out at some point in your lifetime.
With a Lifetime Mortgage there is no need to make monthly interest payments (although you can if you wish) as the Lifetime Mortgage only needs to be repaid, with any remaining interest, when you pass away or move into long-term care. Any remaining equity in your home after the loan is repaid can be passed on as an inheritance.
An Equity Release provider would need to assess your situation, including value your property, assess your age and possibly health, before deciding how much they would be able to lend you and what the interest rate would be. An Equity Release adviser would be able to run you through this process to determine what each provider would offer and how much it would cost.
There are a variety of features that can be added to a Lifetime Mortgage, such as a Negative Equity Guarantee (no ensure that the loan is never more than the value of your property), Inheritance Protection (ringfencing some of the property value to allow it to be passed to your loved ones), a Reserve Account, or no monthly payments. Being able to choose the features and protections of your Equity Release plan can help you personalise it to your unique situation and needs.