How does Releasing Home Equity Work?


Once you approach your retirement age as a homeowner, you can use the money tied up on your home through an equity release.

The amount that you can get from releasing your home equity depends on the value of your estate and the amount of money you owe to your mortgage.

The Process of Releasing Equity from Your Home

You can only be eligible for an equity release when you reach your retirement years. It is a way of releasing funds associated with your home. This is dispense through a lump sum or access the funds to a flexible lending facility.

The factors involved in how much you can get will be based on your age and the value of your estate. In some cases, if you’re a vulnerable individual, your health may also be taken into account. Moreover, new retirement mortgages or interest only lifetime mortgages affordability will also be counted.

Where to use equity release?

The amount of equity release from your home can be utilized for several purposes. Most of the time, individuals who secure releases use it for home renovations of for paying long term treatment and care. Otherwise, it can also be utilized to pay off your debts or mortgage balance.

What are the types of equity release plans?

There are four types of equity release plans, such plans are as follows:

Interest-only Lifetime Mortgage

This enables you to obtain money against your home while you still reside on it. You can alternatively pay the entire mortgage or pay part of the interest each month. The proceeds will be used to repay your mortgage upon selling your home. This gives you an option to consider roll-up lifetime mortgage wherein you won’t be obliged to repay monthly.

Lifetime Mortgage

This allows you to secure money against your home while you reside on it. Also, you will not repay any since your interest and mortgage are combined. Both the interest and mortgage is paid upon selling your home.

Home Reversion Plans

This type of equity release, allows you to sell your home, or the share of your estate, in compensation for a lump sum amount. In this manner, you can still live in your home for the rest of your life just like renting a place for free.

Retirement Mortgage

This is a new type of lifetime mortgage. It aims to connect the hollow within a residential mortgage and an equity release plan. Since it is secure against your home, you can repay it upon selling you home.

The above types of equity release are available to aid people at times of crisis. However, you should know the risks attached to it. You have to fully understand the risks before you step into either of the options mentioned. You need a personalised illustration to fully comprehend the outline of any equity release plans. For you to be guided, we suggest getting expert advice before you consider an equity release plan.

What are the factors to consider with equity release?

Releasing your home equity is a huge step; hence, you need to consider factors before arriving into a decision:

  • Releasing your home equity will result in diminishing the overall value of your estate. This affects the worth of inheritance that you can pass on.
  • The costs of your mortgage can go up quickly, making your borrowing higher when you’re not making payments on your interests
  • An equity release can influence your tax state as well as certain benefits and entitlement such as your universal credit or income support
  • Securing your debts against your home yield significant disadvantages that you must consider to prevent losing your estate
  • The value of your home as an estate can either increase or decrease in value
  • You can obtain a smaller estate if possible as an alternative to releasing your equity

What are the options to equity release?

Before you consider releasing equity from your home, you must consider help and advice. You might not be aware of the several available alternatives such as:

  • Selling your estate and obtaining a smaller yet conducive one
  • Using saving and investment that are available
  • Checking all entitlements or benefits you are qualified for
  • Considering a home improvement grants

Free Equity Help and Advice

Almost all companies impose charges regarding debts and equity release. However, as we aim to help you get back on your feet, we offer free help and advice. The chance to get out of debt is on you. Sometimes, you perceive it manageable on your own without knowing that you’re making the situation worst. 

Dealing with residential mortgages, retirement mortgages and equity release are sensitive matters. You need experts to guide you which path to take and options to consider.

We have a team of experts that can guide you on how to deal with your current shortcomings. You can use our debt advice tool or call us for help and advice.

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