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Equity release and lifetime mortgages
Equity, in the context of equity release, refers to the difference in the value of your home and how much you owe on it. Equity release is a way of turning this value into cash without having to sell your home. You do not need to have fully paid off your mortgage to do this but you do have to be at least 55 years of age.
There are different types of products available but the most popular is known as a ‘lifetime mortgage’. You borrow a proportion of your home’s value at a fixed or capped interest rate. There will be some fees to pay too. This loan is usually repaid from the sale of the home on death or the need to go into long-term care.
The cash can be used as you wish whether it is to renovate your home, help children, or supplement your income.
Is equity release the right option for me?
Equity release is not right for everyone. As such, it’s important to know when you might be better off finding an alternative option. For example, the younger you are when borrowing in this way, the more expensive it will be as the interest will compound for longer. If it suits, you should be able to drawdown as needed rather than drawing the full amount available up-front. Other things to note include: