By Sarah Williams

Equity release is a financial product available in the United Kingdom that allows homeowners to access the equity (or value) in their home without having to move out. This type of product can be a useful option for homeowners who are looking for an additional source of income or want to use the funds for specific expenses, such as home improvements or care costs.
 

Types of equity release

There are two main types of equity release products available in the UK: lifetime mortgages and home reversion plans.

Lifetime mortgages are the most common type of equity release product in the UK. With a lifetime mortgage, the homeowner takes out a loan against the value of their home and can either receive the funds in one lump sum, a series of payments or a combination of both. The loan, plus interest, is repaid when the homeowner dies or sells the property.

Home reversion plans, on the other hand, are more complex and only available to older homeowners. With a home reversion plan, the homeowner sells a percentage of the equity in their home to the lender in exchange for a lump sum or regular income payments. The lender can live in the property for the rest of their life or until they sell it, and when the property is sold, the lender receives their percentage of the proceeds.

Both options come with pros and cons, and there is no one-size-fits-all solution for equity release. It's important to consider factors such as your goals, the impact on inheritance, and the effect on benefit entitlement. Equity release may impact your eligibility for means-tested benefits, like housing benefit and council tax reduction, which can affect older homeowners who may have other financial needs.

Seek advice

Before deciding to pursue equity release, it's important to get independent financial advice. Here at Blossomfield, we have qualified advisors that can answer any questions you have regarding equity release. Lenders that offer equity release products are also required by law to provide you with a "key fact's illustration", a document which will set out all the important information you need to know, including an illustration of the costs, including the interest rate, and an estimate of the final amount payable.

Equity release can be a useful financial product for homeowners in the UK who are looking for an additional source of income or want to use the funds for specific expenses, such as home improvements. However, it's important to be well-informed, understand the implications and seek professional advice. Equitable release is a complex financial product, and it is essential to carefully consider all factors that might affect the decision, especially if it will have an impact on inheritance and the eligibility of benefits.

Contact us today to see if equity release is a good option for your circumstances.