Equity Release

Unlike a standard mortgage, these loans do not need to be repaid until you either move into long term residential care, pass away, or you sell the property. They are repaid with the funds from a house sale in all scenarios.

There are two common types of equity release, the Lifetime Mortgage and the Home Reversion Plan.

Home Reversion Plan

You sell all or part of your home in exchange for a tax free lump sum to a home reversion company. You remain a tenant with a lifetime tenancy and live in your property until you move into residential care or pass away. Again you can use the funds for whatever purpose you see appropriate.

Once the property is sold, the home reversion company take their share, or the full sale proceeds depending upon your circumstances, any remaining funds under part reversion are added to your estate.

A home reversion is a complex property transaction. You should seek legal advice to ensure that you fully understand all of the implications for you and your home and for anyone who might otherwise inherit the property

Lifetime Mortgage

A fixed rate for life loan which is secured against your home, whilst you retain full ownership. It allows you to release equity which is trapped in your home to be used for any legitimate purpose - such as gifting a lump sum to family to be used as a deposit, or home improvements to your property etc. You would also have an option of monthly drawdowns as a tax free ''income'' this could however impact your eligibility for state benefits.

You have the option to cover the interest monthly (similar to an interest only mortgage) or choose to pay nothing and roll up the interest and add this to the outstanding balance (doing so further diminishes the equity in your home). The loan is repaid in full upon the sale of your home.

Check that this type of mortgage will meet your needs if your wanting your family or others to inherit your home. If you are in doubt, seek independent legal and financial advice