Stress-free Guide to Equity Release Planning


As retirement nears, financial pressure increases. Running short on cash becomes a nightmare, with less and less time to correct money problems through work alone. Your pension plan may not bring the results you were expecting. Unexpected expenses may emerge.

The traditional solution to this problem has been to sell valuable assets. This usually translates into “selling your home”.

An often forgotten counterpoint to this suggestion: we don’t like to move away from home. The only way this achieves extra cash for you is if you then move into a cheaper, smaller property. Downsizing is worth considering, but moving is a lengthy process. At 55 or over, who wants to deal with that?

Staying at Home: Equity Release Plans

If you need a large cash sum fast, there is a potential solution that allows you to remain at home. An equity release plan may be right for you. “Equity release” refers to the ability to access the value of the property you are living in. Say your property is worth £500,000. With an equity release plan, a company will buy a part of your property, giving you the worth in cash. You may arrange to sell 20% of the value to an equity release company. This can net you £100,000. You can get this money as a lump sum or as a steady stream of income.

This doesn’t mean that that part of your home is now for others to access! The property here is defined only by its value. You will still retain ownership of your home. You can find an excellent video explaining equity release plans in more detail online.

Take Care: Getting the Right Information

More and more people are exploring this option every year. The market released £1.71 billion in equity to UK homeowners last year, an all-time high. But there are disadvantages and risks to this method; it is vital that you make a decision that is informed.

A useful first step is to estimate the returns you could make with equity release. If you know your property value and what (if any) mortgage you have left to pay, you can calculate this. can provide you with an accurate estimate. You can also get free and direct consultation with an FCA-regulated adviser. This will help you make the choice that’s right for you, even if that means avoiding equity release altogether.

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Risks and Benefits

There are two types of equity release plans. One is the home reversion scheme. The chosen company will take ownership of some or all of your property while you keep the right to live there. In exchange, you receive a share of the property’s value. This means you may surrender, say, 70% of the property for 20% of the property’s monetary value. In the end, this quick cash injection means surrendering the actual cash value of your property.

Home reversion is the least popular form of equity release. It does, however, have a notable advantage over lifetime mortgage (the second type). Because the money you receive isn’t a loan, there is no interest to pay. Application fees also tend to be lower for home reversion schemes.

Lifetime mortgages make up most of the equity release planning market. They let you take a loan on your property in return for a higher overall sum, compared to home reversion. The minimum eligible age is 55, lower than in the average home reversion scheme (which is often closer to 65). Take note that it is a type of loan, and as such comes with interest rates. Be sure to discuss safeguards (such as negative equity guarantees) with your ERP provider.

There are many risks and benefits to an equity release plan. Discuss any plans with an independent financial adviser before committing to anything.

See our Top Six Reasons To Take Out A Loan if you’re thinking of getting some quick cash!