You might be happy leaving your assets where they are, but many people want to try and get some of that capital back out of their bricks and mortar property, and into their bank account. That’s where equity release comes in. Equity release is all about utilising this potential, and providing you with a pot of money that you can use to spend in whatever way you want. There are two methods that allow you to do this, which involve taking out a lifetime mortgage or by selling all or part of your home.

What is a Lifetime Mortgage?

This is the process that most people choose when they decide on equity release. It involves taking out a new mortgage on your property. The home still belongs to you but you don’t have to pay anything to the lender until you either die or permanently move into a care home. What you do with the money is up to you – use it to provide finances to your children, invest for the future or simply spend it!

If you want to reduce your liability, some providers allow you to repay the mortgage interest although many people tend not to. There’s a minimum age of 55 for taking out a lifetime mortgage and you can only normally lend up to 60% of the value of the property.

Once you die or move into a home, the property is sold. If the final sale value of the home is less than the amount you owe, you will not be eligible to meet the difference as the loans come with what is called a no negative equity guarantee. You can also move to a new property if your lender agrees and the other property is suitable.

What is Home Reversion?

The alternative is to sell all or part of your property to a home reversion provider for either a lump sum or regular instalments. You get to stay in the home until you die as long as you keep it maintained and properly insured. You will normally get a certain percentage of the property (or part of the property) value. This can be anywhere between 20 and 60%, the potential increases the older you are.

The age when you can opt for home reversion is higher than with the lifetime mortgage, usually over 60 or 65. Again, you can decide to move but the provider has to agree with the choice of new home and there is also a no negative guarantee which means you don’t have to worry about devaluation.