Types of Equity Release

Lifetime mortgages

A lifetime mortgage is the type of equity release plan where you take out a loan secured against your property .The loan is given to you in the form of a tax free cash lump sum to use as you wish. No loan repayments are required as the loan is paid back when the plan ceases, in the meantime any interest accruing is added to the original loan amount. The interest will accrue at a fixed or variable rate.

The plan will cease usually should you move into long term care or definitely when you and your partner die, at this stage any all repayments are made. You can typically release between 18-50% of the value of your property with a lifetime mortgage, depending on your age.

Advantages of a lifetime mortgage

  • A lifetime mortgage gives you the choice of a cash lump sum or income with no monthly repayments to meet
  • You remain the owner of your home
  • Younger people may obtain a lifetime mortgage (aged 55+)
  • Any SHIP approved lifetime mortgage will come with a no negative equity guarantee
  • There are lifetime mortgage plans available that will guarantee an inheritance for your family
  • The Financial Services Authority regulates all advisers and providers of lifetime mortgages

Disadvantages of a lifetime mortgage

  • Your estate will have a debt to repay at some stage
  • The interest applied can grow quickly as it is compounded
  • Home reversion plans will allow you to release more than lifetime mortgages, especially at younger ages.
  • Should you decide repay the lifetime mortgage early, you may have to pay an early repayment charge

Lifetime mortgages have grown in popularity over the past few years, prompting many providers to offer a variation of a lifetime mortgage called a drawdown lifetime mortgage. These plans enable adhoc withdrawals of tax free cash as and when you need it, the idea being you only pay interest on what has been drawndown.

Why don’t you get an estimate of how much cash you could receive form your home with a lifetime mortgage by using our equity release calculator.

The Equity Release Bureau offer independent financial advice on a comprehensive range of equity release plans including lifetime mortgages, if you are interested in raising capital with an equity release plan then get specialist independent financial advice on equity release by speaking to one of our expert advisers.

This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

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Drawdown Plan

A drawdown lifetime mortgage is a variant of a lifetime mortgage where clients will release equity on an ad-hoc basis and will only be charged interest as capital is drawn down at each stage. Any lending with accrued interest will still be payable by the estate.

Home Reversion plans

A home reversion plan is where you sell some or all of your home to a reversion plan company in exchange for a tax-free cash lump sum and a guaranteed lifetime lease with no monthly repayments to meet.

From this point onwards you may stay in your home (paying a nominal rent) for as long as you choose and are able to guarantee an inheritance to your beneficiaries. Providing you have not sold all of your home to the reversion company you will benefit from any house price increase in the part that you have not sold.

Advantages of a home reversion plan

  • The facility guarantee an inheritance for your beneficiaries
  • There are no repayments to make
  • You benefit from any increase in value of the percentage of the property that you still own
  • Reversion plans may be available to those aged 55+ and you can typically raise more money from your home at a younger age with a reversion plan than a lifetime mortgage would allow
  • Older customers will be able to release more

Disadvantages of a home reversion plan

  • As the reversion company is allowing you to remain in your home (paying a nominal rent) for what could amount to a number of years they will not pay you a true market value for some or all of the property
  • You will not benefit from any house price increase in the part of the property owned by the reversion company
  • Reversion plans cannot usually be reversed as you are selling part of your home
  • The majority of reversion plan providers do not guarantee further advances

Home Income Plan

These plans are available for capital that has been released via a lifetime mortgage or home reversion plan where the capital is used to purchase a guaranteed income in the form of an annuity.

The Equity Release Bureau offer independent financial equity release advice on a comprehensive range of equity release schemes including home reversion plans, if you are interested in raising capital with an equity release plan then get specialist independent financial advice on equity release by speaking to one of our expert advisers.

This is a home reversion plan. To understand the features and risks ask for a personalised illustration.

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