The 'equity' in your home is the difference between its value and any outstanding loans, such as a mortgage, secured on it.
Equity release is a way of unlocking a proportion of the value - or equity - you have in your home in exchange for a tax free lump sum.
What can equity release be used for? There are no restrictions on what the money released can be used for; some common uses include home improvements, family gifts, purchasing a car or travelling abroad. The average amount released is just under £50,000.*
What are the main types of equity release? There are broadly two types of equity release plan available:
- Lifetime mortgages enable you to take out a loan against the value of your house. They are the leading type of equity release plan available. In the second quarter of 2011, 98% of advances were for lump sum or drawdown lifetime mortgages*. Read more detail
- Home reversion plans enable you to sell a share of your home in exchange for a lump sum or regular income. They represent 1% of the market.* Read more detail
Are there any repayments to make?In the case of a lifetime mortgage, you can choose not to make any repayments of interest or capital on this loan during your lifetime. Instead, interest owing is added to the initial sum borrowed and any money borrowed in the future.
This loan plus the interest is repaid to the equity release company from the sale of your home (or from your estate) when you or your surviving partner die or move into long term care.
In the case of a home reversion plan, you make no repayments because this is not a loan. You sell a share of your property to the home reversion company and when the house is sold when you or your surviving partner dies or moves into long term care, the company is repaid in line with the share that they bought.
Just Retirement does not offer home reversion plans.
Equity release may involve a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration.
*Source: Safe Home Income Plans (SHIP), the trade body for equity release providers. Based on data for April to June (Q2) 2011. Figures represent approximately 90% of the equity release market.
Useful links Uses of equity release
Our equity release calculator
Moneyadviceservice.org.uk
Safe Home Income Plans (SHIP)