What Is Equity Release & How Does Equity Release Work in Dec 2021?

What's an Equity Release Mortgage & How Does Releasing Equity From Your Property Work?

Do You Want to Learn More About Releasing Equity from Your Home? Get EXPERT Equity Release Advice & Get Equity Release Explained Simply.

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Equity release can help you to turn your property into valuable retirement income. Find out if it’s right for you.

What Is Equity Release?

Equity release is a way for people to access the funds from their homes without selling them. Equity release products come in many different forms, each of which has benefits and drawbacks that need to be considered before choosing one.

There are many benefits associated with using equity release. The most common type of benefit is financial because homeowners get cash out of their property while still maintaining ownership — this could help cash flow or provide money when they’re no longer able to work full-time due to age or illness.


Tax benefits with equity release because the IRS only considers a fraction of interest paid on an equity release as taxable income.

The Many Uses For Equity Release

There are many uses for equity release — the most common being financial. But it can also be used to live in your own home longer or even as an inheritance tool. Here’s a look at some of the different ways equity release could work for you:

Let’s have a look:

  • Improving Cash Flow
  • Providing Money When You’re No – Longer Able To Work Full Time Due To Age Or Illness
  • Giving Your Family A Helping Hand
  • Reclaiming Lost Value In Your Property That Wouldn’t Be Possible Elsewhere
  • As An Inheritance Tool For Your Family
  • Living In Your Own Home Longer And More Comfortably
  • Adding Capital To Your Estate For The Next Generation
  • Making A New Start With Someone Else’s Equity Partner
  • Retirement Planning
  • Buy More Time Before Selling If You Want To Downsize

An equity release plan is a way to use your home or other property as collateral and access funds, usually without paying tax. Equity release plans are designed for people who want the benefits of using their property but don’t have enough money in the reserve to pay off the mortgage when they retire (or can no longer work).

Learn More: What Are the Main Uses of Equity Release?

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Equity Release Products

The Lifetime Income Plan is an equity release product that enables you to borrow money against the value of your home – up to 75% – and receive a regular income for life. The plan includes features such as inflation protection, so payments remain constant in the future, irrespective of any changes in interest rates or property values.

You can also take advantage of tax-free cash to fund education, improve health and well-being, meet care needs or purchase long-term care insurance.


For those who want more flexibility than the Lifetime Income Plan offers, there are two further products: Home Options which allows access to 100% of the value of their property (or £100k), with no loan repayment charges until they sell their property, and the Lifetime Drawdown Plan which enables you to release cash from your home without taking any loan repayments.

Optional Equity Release Safety Features

Inflation protection: As well as the borrower choosing an inflation rate, it is also possible to index the number of repayments due each year. This means that repayment amounts will increase with any rise in inflation (or decrease if there are decreases in interest rates or property values).

Care needs funding plan: With this package, borrowers can withdraw a percentage of their equity over time, not just when they need care but to provide for future costs such as long-term care and other contingencies.

The opportunity fund option provides some flexibility because you may use funds released into an Opportunity Fund at your discretion until 100% of its value has been spent on whatever purpose you choose from education, health & wellbeing improvements, and meeting your essential needs (including care costs).

Let me explain,

Suppose you are a first-time buyer or have not used up your lifetime limit. In that case, the Lifetime Opportunity product is for you. This means that each repayment will be based on what is left of equity in your property after subtracting previous payments from it.

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Risks of Equity Release

There is a risk that if you sell your house to fund care, then it might not be worth enough money for you to buy another home when you need long-term care. Another risk is that repayments have to be made out of current income. In periods of low earnings or unemployment, it will affect how much can be repaid and what type of repayment plan could work best for you.

There are ways around both these issues – with payment caps on costs meaning that no matter what happens in the future, your repayments won’t exceed a certain amount which means there’s always some flexibility; also, withdrawing upfront a percentage from the capital before releasing equity into an opportunity fund means even if you need care for a long time, the capital will remain intact.

Make sure you read about the 7 Pitfalls of Equity Release.

How Much Will Equity Release Cost?

Main article: Equity Release Costs

This depends on your circumstances and can include the following:

Let’s take a closer look:

Legal fees £350-£400 per hour (x approx. two hours) plus VAT, an Administration fee of around £500 to cover various costs including lenders’ legal advice fee (£0 if you are selling), valuation, conveyancing, and other expenses, Financial advisers cost – typically a percentage of the equity release amount requested with an upfront payment for example 0.75% up to £250k + VAT; Equity release provider charge – again this will depend on what type of loan is arranged, but there are always tiered charges based on how much capital has been released at any one time which often start from less than a percent in year one up to four or five percent applied to the total loan capital released.

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Getting an Equity Release Quote

The lender will want to know the value of your property and any other assets you may have, as well as your age, income, and whether or not anyone else is living with you.

You’ll also need to provide some basic information about yourself, such as where you live and how long it has been since you retired.

Your home must be paid off before an equity release loan can take place, so if there are mortgage payments left on a residential property, then that needs to be covered first or sell your home for more than its price tag, which would allow for these additional costs in full without incurring significant expenses.

You should expect Equity Release providers who offer 100% loans – meaning they cover all associated fees, including legal charges in their quoted read this article before making any decisions prices – to ask for a deposit of between £300 and £800.

The equity release provider will also need to carry out a valuation of your property before carrying out the loan. This should be done to ensure that they know how much they can lend you and what price.


If everything goes according to plan, then the money from an Equity Release loan could help with medical bills if you are unable or unwilling for whatever reason – usually financial reasons – are not able or willing for some other reason which cannot be disclosed here due to legal restrictions-to pay them yourself, renovations on your own home such as new windows and bathroom suites, holidays especially those abroad where prices might prove prohibitively expensive without taking into account any additional medical bills.

These home improvements may be needed to make your property more liveable and comfortable for you and any other major expenditure, such as if you wanted to buy a car.

What Affects the Interest Rate You’re Offered?

The interest rate you are offered on your Equity Release will be dependent upon several different factors. These could include the age you are at, how much equity we’ve paid off from your property, and what type of loan or mortgage product it is that you want to take out. The more equity there is in the property for us to release then this means that our risk as providers reduces which should give better terms than if we were taking all or most of the value of your home upfront without any funds left over from the previous payments made by yourself or other family members.

Even though rates may vary significantly between lenders, they can still cost less than many other types of loans such as credit cards, where even one missed payment might result in a considerably higher charge.

Equity Release has been away for many people to release equity that they may not need anymore.

Let me explain,

For example, someone who is terminally ill and no longer wants the responsibility of owning their home or someone who knows they will never afford it again. Equity Release can enable you to stay on your property, live life on your terms with dignity and without worry about money, which could make all the difference when facing up to what might seem like an impossible decision at first glance.

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The 6-Step Equity Release Process

Main Article: Equity Release Process

Let me guide you through the process,

Step One: We will take the equity from your home and turn it into income for you.

Step Two: You can use this money as you like – there are no restrictions or limits on how you spend it.

Step Three: The full amount of cash is yours, so we don’t ask any questions about what you do with it.

Step Four: It may be possible to get an interest-only mortgage which means that you are not paying back the entire amount of your loan.

Step Five: You have complete control over how much you use from this cash each month.

Step Six: When you die, your children will inherit all of it as a lump sum, and they won’t need to pay any inheritance tax because it is not treated as income.

Alternatives to Equity Release

Main article: Alternatives to Equity Release

The alternatives to Equity Release are very closely related. One is a lifetime mortgage which works in much the same way as equity release but does not leave you with any property to pass on to your heirs.

Another alternative is that instead of using cash, you borrow against the value of your home and then use this money for whatever purpose suits you best – whether it’s paying off debts or investing in other projects such as starting up a business.

Finally, Homeowner Plus is an arrangement where borrowers can get access to their equity when they need it without having to sell their home or take out a long-term loan. This is sometimes the best option for people who want to keep their homes but don’t have any cash savings.

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Understanding What Retirement Interest-Only Mortgages Are

Retirement interest-only mortgages are a type of home loan that can be used for those who have retired or plan to retire in the future. It is possible to turn this into an investment option, which means you don’t need to use all of your money on living expenses, such as mortgage repayments.

This also allows retirees access to their equity more quickly without needing any income from the property.

The means-tested benefits of this type of mortgage are that it is possible to take out a smaller repayment amount than what you would need with some other types of lending, so it can be more affordable and flexible for retirees who want to break free from an inflexible long-term loan agreement.

You may also find yourself paying less interest because your monthly repayments will not change if the bank base rate changes in future years.

There’s no restriction on how much money you have coming into your account each month, which means there isn’t any pressure when planning retirement income or savings. Of course, this could act as another form of investment, too – but remember: they do come at a cost, just like all mortgages usually do!

Remortgaging As an Alternative to Equity Release

This type of equity release can be good for those who are struggling to make mortgage payments. It may also work well if you need to access funds because they come at a lower interest rate and the repayment periods are smaller than in other types of lending, so it could be more affordable and flexible for retirees who want to break free from an inflexible long-term loan agreement.

Equity Release isn’t just restricted by how much money is coming into your account each month either – meaning that there’s no pressure when planning retirement income or savings too.

However, remortgaging offers a similar alternative because these deals do not involve any borrowing and are a great way to release some of the equity that you’ve built up in your property.


It’s also worth noting that Equity Release doesn’t always have to be used on residential properties either, so it can offer flexibility if you want to use your assets for something else – like traveling or investing in other things!

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How Equity Release Is Regulated

The Equity Release Scheme is regulated by the Financial Conduct Authority and overseen by the Equity Release Council. They work to ensure that the lenders are following appropriate standards of conduct, including disclosing information about costs before any agreement has been signed off on – and they also limit what can be charged back to 12%.

The council’s regulations also state that loans must have a maximum term of 25 years with interest rates set at between 0% and 45%, as well as allowing for access to cash in advance through releasing equity from your property without having to move home or sell up.

What does this mean?

This means you could release some capital when it suits you best, rather than find yourself held hostage until retirement age too!

Equity Release Advisory Services

The Equity Release Council offers free Advisory Services for those considering taking out a mortgage that will allow you to explore all of your options and find the one that best suits your needs. If, after receiving advice from an equity release advisor, then they won’t charge any fees at all; however, if you do agree with their recommendations, there is still no obligation on your part.

How Does It Work?

You may still be wondering, just how does equity release work?

The equity release product is taken out by a borrower aged 65 or over. The lender acts as executor of their will. They can then pass on securely to heirs what would have gone to repay debts, including mortgages and other loans.

The amount released depends on how much you borrow – typically up to 25 percent of your home’s value – and for how long, from five years (a “fixed-term”) upwards in a lifetime mortgage equity that could last 30-40 years until death; many lenders also offer fixed rates whose interest is deducted monthly or yearly, so it doesn’t grow any larger but stays constant.

Equity release usually comes at an initial cost: most providers charge two percentage points upfront plus fees (£600 typical) paid off over a decade.

There are two key factors to consider before taking equity release out of your home, which may not be appropriate for those with medical conditions or dementia: the interest rates on offer and whether you will need care in the future.

On the other hand,

The best providers offer fixed-rate life mortgages with no early repayment charge so that you can change plans if required without penalties. They also allow monthly repayments rather than cash lump sums each year – this is often more manageable as it leaves flexibility depending on how long someone lives after retirement.

Care charges, meanwhile, could add up to £3000 per month; some providers include them within their price, but others do not, so make sure there’s provision for what might happen down the line if health problems arise.

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Should I Release Equity?

Many people choose to release equity when their retirement income is not enough for them, or they need extra money to support themselves as a pensioner.

Let me explain,

For example, if you’re worried about your quality of life in the future and want some peace of mind from having access to funds now, then releasing equity may be an option worth considering. It’s also worth noting that there are tax benefits attached with this decision, so it could even be wise on a financial level, too – but do make sure you speak with a specialist before taking this step just in case!

If you decide that releasing equity is the right choice for you, then – like any other investment – start by researching what providers offer mortgages at different interest rates and how much care charge assistance will be available.

You can use many different methods to release equity, including a lifetime mortgage or a home reversion plan – but whichever route you choose, it’s important to make sure that the equity release provider can offer the best service for your needs and budget.

A quick online search should provide all of this information in one place, so check out what others have said about specific providers before making any decisions. You may also find our blog post on how equity release works helpful if you’re still unsure of exactly what options are open to you!

Is It A Good Idea?

A lifetime mortgage or a home reversion scheme could be the best option for you, depending on your situation and needs.


If you’re looking to release some equity to make ends meet but finding it difficult – either due to age restrictions that providers have, or if there’s simply not enough equity available – then this might just be what you need!

Equity Release is becoming increasingly popular as people face up against retirement with poor financial security. With interest rates so low at the moment, many are struggling financially. The Equity Release plan can help give them back control over their finances and enable them to live life how they want without worrying about money issues anymore.

Explaining The Contract

Consider Downsizing

Before you look to Equity Release, consider downsizing your property.

For many people, downsizing is the only option they have if they want any kind of release on their equity – and this can mean moving into smaller accommodation might be more manageable for them at present.

This could make it easier to free up some equity before looking elsewhere for an alternative solution that does not involve selling your home – or worse still, renting!

However, do bear in mind what’s involved with residential leasing agreements. There will be fees attached plus all sorts of other things such as service charges costs associated with each lease agreement, so really think carefully about whether this would be worth doing or not.

When Does Downsizing Work?

There are several reasons why downsizing might work for you. If your mobility is deteriorating and it’s getting harder to get around the home, then moving into smaller accommodation could be an option that would enable you to live independently with less hassle.

When adults who have reached retirement age find themselves living alone in their property, they may decide that the only sensible thing is to move somewhere where they can enjoy company once again – possibly even going back to elderly care facilities or residential homes which offer social activities such as cooking classes and line dancing!

Couples who have lost one partner through death or divorce feel unable to continue occupying their property because up until now. Two incomes were coming together – so this will for your living expenses, then equity release is a way to do this.

It gets better,

You can sell as much of the equity in your home as you like, and it is possible to use 100% if necessary, but we recommend releasing no more than 75%. Equity release also means that you cannot sell or give away any part of the property when you’re alive for at least six years after purchase. This is because some tax issues are involved with selling off assets before death, which need time to be resolved first.

The costs will vary depending on how much money has been borrowed, what type of property was used as collateral and where it was purchased (mortgage provider).d

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Other Costs You Should Think About:

Stamp Duty – This is a tax that you have to pay when buying property. It can be paid upfront or added onto the mortgage with some lenders, but it still has to be accounted for in your monthly repayments.

Legal fees are costs incurred when using equity release and vary depending on what type of scheme you are using.

Council Tax – this is an annual tax charged by the local council that you will need to pay for your home. It’s calculated based on several factors, including the value of your property if any increases were made since last year.

Insurance – some equity release providers require mortgage holders to take out their insurance policy, which can be done so at any point before or after taking out equity release.

You Can Sell Your Assets

If you have assets that are not necessary for your day-to-day life, such as a car or some artwork, these can be sold to raise funds.

This will reduce the amount of equity release needed and allow you more flexibility with what type of Equity Release is available.

It’s worth noting that if any assets are sold, they may lose their value rapidly over time, so it might be better to do this before taking out equity release.

One type of Equity Release is a Lifetime Mortgage, where you can still live in your home, but the amount borrowed reduces over time.


Another type of equity release is an annuity mortgage which works by paying off your property after 25 years and returning it to you free from any debts or mortgages on the property.

This could be good for those who have put down some significant money upfront when buying their house as it ensures that they get this back at the end of their life regardless of how much they owe on the property – great if you’ve been saving up hard since before taking out a mortgage!

What Are The Core Factors In Equity Release Process?

  • Equity Release Process
  • Types of Equity Release: Lifetime Mortgage, Annuity Mortgages
  • What are the core factors in the equity release process?
  • Considerations before taking out equity release.

What is a lifetime mortgage, and what does it entail? Lifestyle considerations to make when considering whether you should take out an annuity or not.

Tips on making sure your loved ones know about any plans with their property. It may also be important for those who have children to understand what equity release may mean for them.

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How Much Does Equity Release Cost?

The costs of equity release are often high. An understanding that there is a cost attached to it and what the figures will be could help people make an informed decision about whether or not they want to take out equity release.

Some potential life events in which you may wish to consider taking out equity-release:

Let’s take a look:

  • You need more capital for your business but can’t remortgage;
  • You have expensive health needs, meaning you spend much of your pension on these costs;
  • Your children are struggling financially with no assets forthcoming from inheritance (perhaps because their parents didn’t plan);
  • There is a death in the family who had left property behind without any way of paying off any mortgages themselves before they died.

What’s the Total Cost?

The total cost of a lifetime mortgage is the amount you borrow, plus interest and other fees.

Equity release costs can vary depending on your circumstances, but in general, it works out as £1000 for every £100,000 borrowed.

Fees are usually charged upfront at the start of the contract and will be around two percent of what you owe when borrowing between 50,000 to 80,000 pounds.

Let me show you,

For example, with one company, this could work out as an annual fee being levied by them which would equate to about four thousand pounds (£4000) or so across their threshold period (usually 20 years). If they charge more than that, then think again! It’s worth shopping around because there are variations in what companies charge.

Equity release can be used to supplement retirement income, as an inheritance, or for other purposes such as consolidating debt.

Is Equity Release Safe?

This is a common question, and the answer is yes – it’s safe as long as you don’t use this type of borrowing to make up for your monthly living expenses.
So if you’re struggling with rent or mortgage monthly payments, then equity release isn’t for you! As one advisor told me: “It’s not about buying more shoes when your cupboard is bare”.
This would be turning to equity release purely out of necessity rather than financial planning. Equity release can offer borrowers an opportunity to consolidate their costs in a single payment; however, there are risks involved which need careful consideration before taking on any agreement.

Do I Have Protection When Releasing Equity?

The Financial Conduct Authority regulates equity release providers. As a result, all equity release products come with a ‘Key Facts Illustration’ document, which outlines any risks involved.

This is important before you take on an agreement so that you know what to expect when it comes to releasing equity in your property – how much money will be paid out each month, for how long, and whether or not there are extra charges.

It also outlines the costs associated with taking out a debt-free life mortgage of £200,000 over 25 years at interest rates between 0% and 12%. This would include one-off set up fees of around £700 (£570 without our referral credit) plus monthly repayments (at 12%) of either: a) £465.89 for 25 years or b) £625.36 over the full term of the mortgage – depending on whether you take out an interest-only, repayment or annuity option.

How To Find Expert Advice?

You can find financial advice on the Equity Release Council website or by contacting a financial advisor. You should also consider talking to your solicitor, accountant, and any existing lenders when considering taking out equity release – you may be able to combine it with other products such as an equity release loan.

The Equity Release Council website is the go-to place for information on equity release, including a personalized mortgage calculator that will show you how much money your home could be worth at retirement age and what size of mortgage you need to do so.

The site also provides an easy guide to all things related to equity release – from eligibility criteria (including limitations for those with dementia) and funding options through to alternatives such as Home Reversion Scheme or other welfare benefits available if eligible.

Common Questions

What Are the Pitfalls of Equity Release?

Is Releasing Equity a Good Idea?

Can I Pay Back My Equity Release?

What Is the Best Age to Take Equity Release?

In Conclusion

In a nutshell,

Equity release is the best option for those looking to reduce their mortgage debt and live in comfort. If you already have a pension, an equity release will allow your family or loved ones access to this money when it comes time for them to pay off your debts. You must research all of your options before taking any action.

More to explore

Before You Go!

Let's See How Much You Can Release 👇


Equity Release Calculator

Value of Your Home?


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🔒 100% Secure & Fast. Takes Just 8 Seconds.