If you are over a certain age (generally older than 50) and own your own home, you may be able to take advantage of an equity release scheme, where you are releasing equity, either capital to be released from your home, or income earned from it, without you having to move from the property. The equity, or value, in your home is its value on the open market less any mortgage or debt secured on it.

This equity release guide explains the different types of scheme:

With home reversion plans you sell all or part of the value of your property to a reversion company or an individual. You no longer own the property but live there as a tenant of the reversion company or individual, and the home is sold when you die or move out. The company or individual benefits from any increase in value of their share of your property.

Alternatively, you can take out a lifetime mortgage, or equity release mortgage, secured on your property. With this scheme you continue to own your home, but have to repay the mortgage on it. When you die or move from it, the mortgage is repaid from the proceeds of the sale.

Whichever of these equity release solutions you take, you will receive less income or money than the market value for your home as your home cannot be sold until you die, or move out, perhaps to a care home.

You can take the money as a lump sum, and then you can invest it in an annuity or other investment to obtain an income, or you may be provided with an income from the scheme. Some schemes provide an income or lump sum only when needed and not automatically.

However, equity release schemes can be complicated and not ideal for everyone, and so it is important to take impartial professional advice before committing to one.

It may be better to sell your current home and buy a smaller one, therefore retaining full ownership of your property and avoiding paying interest on a mortgage. You may alternatively be able to raise funds from savings, private pensions or investments, or from state benefits. Your council or a charity or other organisation may be able to provide funds for repairs or home improvements.

Bear in mind that an equity release scheme could affect your tax position or entitlement to state benefits. Inflation will affect the value of any income you receive, and there will be arrangement and valuation fees, legal costs, possible rental charges (some schemes include these) and early repayment charges should you leave the scheme before the end of the contract.


By Ben West