Frequently Asked Questions

What is equity release?

Equity release allows homeowners over the age of 55 to release equity or ‘give up a stake’ in their property and receive one large lump sum.

Equity release is commonly used to finance your remaining lifestyle, pay off debts or fund any home improvements. The benefit of equity release allows you to continue living in your home until your die or move into long term care – at which point the provider claims their stake in your property and any remaining equity is giving to your children as inheritance.

What is the difference between equity release, lifetime mortgage and home reversion?

There are two types of products available from Equity Release Online, known as home reversion and lifetime mortgage. Both allow you to stay in your home until you die and release money upfront.

The lifetime mortgage is the most common product and essentially runs until the rest of your life, hence the name ‘lifetime.’ There are typically no fees to pay as this is all wrapped up in the overall cost of the plan. A key point is that you still have ownership of the property and can benefit if it goes up in price, allowing you to withdraw more money or pass it on as inheritance.

Home reversion is less common and refers to selling a stake in your property outright to a provider. Although you still live in the property until you die or move into care, you are selling a stake and will not make anything from that stake if it goes up in value. However, because you are selling equity in your home there and then, you will typically receive a higher lump sum than a lifetime mortgage product.

Is there tax paid on equity release?

No, any lump sum or income you receive from releasing equity from your home is tax-free, because it is being released from a property that you have paid for over time and own.

Can I stay in my existing home?

Yes, absolutely, this is a key benefit of equity release, as it allows you to stay in your existing home or flat until you die or move into long-term care.

Can I move home once I have a plan?

Yes, equity release schemes are portable, meaning that they can be transferred to other properties. However, it is always important to speak to your provider who may adjust the terms of your agreement on a case-by-case basis.

What is the minimum age to apply?

The general minimum age for using equity release is over 55 years and over 65 for home reversion plans. The providers we work with at Equity Release Online will present different terms and conditions based on the products you have requested.

Do I pay fees or just give up a stake in my home?

Interest is charged by equity release providers. With different plans available, you can choose to pay monthly interest or let the interest roll up, known as compounding. This means that you do not paying anything after receiving your lump sum, and interest is only paid at the end when you are no longer using the property, you die or go into long term care.

Please be aware that the equity release process will typically include arrangement fees, legal fees and valuation fees. While some of these may be able to be added to the amount you release, others may have to be paid upfront.

Do I give up a stake in my home when using equity release?

Yes, you are giving up a stake in your property and for that stake, an equity release provider will give you a lump sum which is tax-free. The provider benefits by charging interest (either each month or rolled up) or by hoping that your property has increased in value over time.

Can I take out equity release if I have a mortgage outstanding?

Yes, however the money you release can only be taken from the part of the property that you own.

How much can I borrow through equity release?

Whilst the average amount borrowed through equity release is around £60,000 to £80,000, the amount you can borrow depends on various factors including your current mortgage value, outstanding mortgage value and postcode. For a free quote, use our equity release calculator.

How long does it take to receive funds?

The average process usually takes 4 to 6 weeks from start of enquiry to completion. Factors that will affect the completion rate include the processing of information by your equity release lender, advisor and solicitors.

What happens if I die or move into long term care?

Upon your passing or moving into long term care, the executor of your Will is the person that will be contacted with regards to your property. At this point, the equity release company will collect their stake in the property and any interest that has accumulated.

Any remaining equity in the property will be left for the executors of the Will, relatives and children in the form of inheritance. The family of the bereaved may continue to own the property upon agreement with the finance provider.

How does equity release affect my children’s inheritance?

Equity release has many options designed to help protect your children’s inheritance. The sum of the final inheritance will be slightly lower, given that you have released equity in your home.

The final amount bequeathed to your children and grandchildren will be dependent on the remaining value of the property, minus the interest that has accumulated.

To protect the inheritance, the providers we work with at Equity Release Online offer an Inheritance Protection Guarantee so that you can secure a certain percentage for your children.

There are other options available such as ‘interest-only lifetime mortgages’ whereby you can pay a monthly interest so that the final total is less and more is saved for your children. There is also ‘voluntary repayment lifetime mortgages’ available so that you can make the occasional payment upon request to bring down the overall cost and put more aside as inheritance.

Will equity release affect my state benefits?

Equity release will not affect your pension credit, but may affect your council tax reduction if you have less than £16,000 in capital.

What is a no negative equity guarantee?

This is a clause that means that you will never owe in fees more than your home’s value. This is offered with most equity release plans and it is important to double check for this.

Do I need to have a good credit score?

No, credit scoring and affordability is not part of the application process. Equity release lenders are more interested in the value of your property, outstanding mortgage value and any pre-existing medical conditions.

Can I cancel at any time or repay early?

Yes, you can cancel your lifetime mortgage or equity release scheme, but doing so within a certain timeframe may incur early penalties. Whilst you can repay early, please be aware of any fees for doing so. This information will be presented to you clearly in writing before you proceed.

Do you have any more questions? Speak to an expert on 0800 086 9242