What Is Equity Release? Essential Things To Know

Wondering about equity release? Equity release is a popular financial product that allows homeowners to boost their finances by freeing money tied up in their property.

It can be a great way to boost your retirement pot, take a once-in-a-lifetime trip, help loved ones out, or simply improve your quality of life. Equity release also has a lot to consider, and it is not the best option for everyone.

This post will go over the basics of equity release so that you can better understand the product and determine whether or not it is the right option for you.

What Is Equity Release?

As mentioned, equity release is a financial product that allows you to unlock some of the money tied up in your home. It is available to homeowners over the age of 55, and you are able to continue living in the home. There are two main types:

Lifetime mortgage: The loan is secured against the value of the property. The loan and built-up interest are paid by selling the property when the last borrower dies or moves into care.

Home reversion: Part or all of the property is sold to a provider for a lump sum or regular payments. You can continue to live in the property rent-free or for a nominal rent.

Interest Rates

Interest is charged on lifetime mortgage loans, which can be fixed or variable. This means that the interest rate is a key component of equity release, and you will want to find a favourable rate (which will be difficult in the current economic climate).


Another key consideration of equity release is that it will impact the inheritance you leave behind to loved ones. The equity that you release from the property and interest accrued will need to be paid from the proceeds of selling the house once the last borrower has died or moved into long-term care.

This means that you will be leaving less behind (but many use equity release as a way to help loved ones out financially while they are still alive).

Speak To A Financial Adviser

As such an important financial decision that will affect you and your loved ones, you always want to make sure you make the right decision. This is why speaking with a financial adviser before deciding is intelligent.

You can find local financial advisers by using online platforms, allowing you to browse various advisers near you, including those specialising in equity release. They can offer advice based on your individual circumstances and help you fully understand the complexities of equity release.

Alternative Options

As you can see, there is a lot to consider with equity release. It can work well for some people but not so well for others. Therefore, you should always explore your options and look into alternatives. These could include:

  • Bank loan
  • Financial assistance from loved ones
  • Using savings
  • Downsizing
  • Delaying retirement

Equity release can be an excellent financial product for some homeowners, but it is not for everyone and is a huge financial decision that you need to weigh up carefully.

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