Releasing equity from your home

What is home equity? 

Home equity is the difference between the current market value of your home and the amount owed on the mortgage. For example, if your home is valued at £200,000 and you owe £120,000, your equity would be £80,000. Equity can increase over time, as you repay your monthly mortgage balance and if your home grows in value.  

What is equity release? 

Equity release allows you to access the money from the value of your home without having to sell it. Typically, this is done through various financial products designed for homeowners over the age of 55. You can receive the money either as a lump sum, in multiple smaller payments, or a combination of both. Repayment usually occurs when you pass away or move into long-term care. 

What are the options for equity release? 

There are 2 types of equity release, lifetime mortgage and home reversion. 
 

What is a lifetime mortgage? 

This is when you take out a loan secured against your main home while still owning it. You can keep some of your property's value for your family as an inheritance.  
 

You can decide whether you wish to make payments or let the interest add up.  
 

The loan and interest are repaid by selling the house when you die or move into long-term care. 

What is home reversion?  

Home reversion is when you sell part or all of your home to a company for a lump sum or regular payments. You can continue living there until you die, but you must maintain and insure the property. You can keep a portion of the home for inheritance.  
 

When you die or move into long-term care, the home is sold and the money is split based on ownership shares. 

Reasons you may consider releasing equity 

Releasing equity is a personal choice. Generally, most people release equity when they need a larger sum of money. Some reasons could be: 
 

• home improvements or repairs  
• to pay off debts 
• to gift money e.g., university fund, deposit for child’s first home 

Things to consider before deciding to release equity 

The immediate costs  

Consider the upfront costs involved. These could include including interest rates and fees. Releasing equity could also impact any means-tested benefits you receive. 

Your alternative options  

If you want to access a considerable sum of money, you should carefully consider all your options. Are there any alternative income or financing sources you could use? Weigh up the pros and cons of each before you decide. 

The long-term impact 

Think about how releasing equity could affect your future finances. Things to consider include your ability to leave an inheritance, or maintain your standard of living into retirement. 

How to release equity 

If you want to discuss releasing equity, you will need to first discuss your options with your lender. Their mortgage experts will be able to help.