What is equity release?

Barcan+Kirby Solicitors explain exactly what equity release is and how it works

Equity release allows some homeowners to release tax-free funds from the value of their home. This may be to supplement pension, as financial support, or for home improvements.

With decades of home ownership and rising prices, many people have acquired significant property wealth. In fact, equity release increased by 67% between June 2020 and 2021[1].

There are two ways to release equity. A ‘Lifetime Mortgage’ is a loan taken from the value of your property which is paid back after the last homeowner passes away or moves into care. You can remain in your home and it’s possible to transfer the mortgage if you move. Also, there is no risk of negative equity as the lender will never ask for more than the cost of the property. Repayments can be made but usually interest is accrued over time. Criteria varies but the minimum age is usually 55 and the younger you are, the more value it will lose in the long run.

A ‘Home Reversion Scheme’ is money gained from the sale of part, or all, of your property in order to acquire cash but you remain living there as a tenant. Homeowners generally need to be at least 65 to qualify. It’s a great way to access cash, remain in the house rent-free, and share the proceeds of the sale with the lender. Additionally, as the cash is gained from a sale rather than a loan, there is no interest and you will still own a share of the property for family to inherit.

What are the risks?

It is important to consider alternatives to equity release as it reduces property value and inheritance. A Lifetime Mortgage can accrue a large amount of interest and the viability of a Home Reversion Plan is dependent on fluctuating house prices. Perhaps you could draw from savings or downsize?

As equity release is a highly regulated financial product, it’s compulsory to seek specialist advice and budget for arrangement fees plus financial and legal advice.

To speak to our conveyancing solicitors in Bristol, call 0117 325 2929 or visit barcankirby.co.uk.


[1] https://www.equityreleasecouncil.com/wp-content/uploads/2021/07/210727-Equity-Release-Council-Q2-2021-statistics-news-release-FINAL.pdf

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